Income Distribution

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Income Distribution
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Lorenz Curve
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What is it?

• Illustrates the percentage of distribution of
  income

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The vertical axis the total income of the
economy in 20 increments
of income
of population
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The horizontal axis the cumulative percentage
of people in 20 increments
of income
of population
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The blue, 45 degree line is the line of perfect
equality
of income
of population
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That means 20 of the population receives 20 of
the income
of income
of population
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That means 60 of the population receives 60 of
the income
of income
of population
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Do any countries income distribution actually
look like this?
of income
of population
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The red line represents unequal distribution
of income
of population
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This red line is called the Lorenz Curve
of income
of population
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Notice at the point, 60 of the population
receives only 20 of the income
of income
of population
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Another way of saying this is that 40 of the
population receives 80 of the income
of income
80
of population
40
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Or the top 40 receive 80 of the income
of income
80
of population
40
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Worksheet Practice
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Gini Index

• Represented by the area above the Lorenz Curve to
  the line of equal distribution (A).

of income
of population
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Gini Index (coefficient)

• A / (AB)
• A Gini of 0 means perfect income equality, and a
  Gini of 1 means one person owns all the income

of income
of population
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Gini Indexs around the world

• Haiti .59
• Nicaragua .62
• Sierra Leone .66
• Sweden .23
• United States .45