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Unformatted text preview: While the data of percentage and cumulative percentage can provide a rough idea of how equal or unequal income distribution is, sometimes it is easier to see how they line up on a graph, so that we can get a visual sense of income equality. To do this, plot out how much each of the population segments earns (cumulatively), and compare the resulting curve to a perfectly equal income distribution, which would be a straight-line graph: This type of graph, showing income distribution among population segments, is called a Lorenz curve. Using the Lorenz curve, we can also generate a numerical representation of income equality called the Gini coefficient. The Gini coefficient, which ranges between 0 and 1, is equal to the area between the actual and equal distribution curves divided by the total area under the equal distribution curve. In the figure above, the Gini divided by the total area under the equal distribution curve....
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This note was uploaded on 12/13/2011 for the course ECO 1320 taught by Professor Staff during the Fall '11 term at Texas State.
- Fall '11