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Economics notes

# Calculation Of Gini Coefficient And Lorenz Curve Analysis

➡️ Gini coefficient is a measure of inequality in a population, which is calculated by dividing the area between the Lorenz curve and the line of perfect equality by the total area under the line of perfect equality.
➡️ Lorenz curve is a graphical representation of the distribution of income or wealth in a population, which plots the cumulative percentage of the population against the cumulative percentage of income or wealth.
➡️ The Gini coefficient and Lorenz curve analysis can be used to measure the degree of inequality in a population, and to compare the degree of inequality between different populations.

### What is the Gini coefficient and how is it calculated?

The Gini coefficient is a measure of income inequality that is calculated by dividing the area between the Lorenz curve and the line of perfect equality by the total area under the line of perfect equality. The Gini coefficient ranges from 0 to 1, with 0 representing perfect equality and 1 representing perfect inequality.

### What is a Lorenz curve and how is it used to analyze income inequality?

A Lorenz curve is a graphical representation of the cumulative distribution of income or wealth. It is used to analyze income inequality by plotting the cumulative percentages of total income received against the cumulative number of recipients. The greater the gap between the Lorenz curve and the line of perfect equality, the greater the level of income inequality.

### What are the implications of a high Gini coefficient?

A high Gini coefficient indicates a high level of income inequality, which can have a number of negative implications. These include reduced economic growth, increased poverty, and decreased social mobility. High levels of income inequality can also lead to increased social unrest and political instability.

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