Consider a simple economy (country A, with 1000 citizens) where 80% of the citizens report an annual income of $20,000,

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Consider A Simple Economy Country A With 1000 Citizens Where 80 Of The Citizens Report An Annual Income Of 20 000 1 (354.11 KiB) Viewed 60 times

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Consider a simple economy (country A, with 1000 citizens) where 80% of the citizens report an annual income of $20,000, while the remaining 20% report an annual income of $80,000. (a) Draw the Lorenz Curve for this economy. (5 marks) E (b) Briefly discuss what the Lorenz curve you have drawn in Part (a) represents about the nature of inequality in this economy. (4 marks) (c) Show the formulation of the Gini coefficient in relation to your Lorenz Curve graph in Part (a), and briefly discuss its range of values and what it represents. (3 marks) (d) () What is the value of the Gini coefficient associated with this economy? Show your calculations, and interpret the coefficient. (7 marks) (e) A neighbouring economy (country B) has a Gini coefficient of 0.35. Discuss based on this information and the Gini coefficient measure you have calculated for country A in part (c), whether country A or B has a greater income inequality? (2 marks) Offer two Plausible reasons related to the labour market on why a country may have a higher Gini coefficient compared to another country. Explain each reason in two to three sentences. (4 marks)