Calculating the Gini Coefficient from the Lorenz Curve Diagram
The Gini coefficient, a measure of inequality, can be determined geometrically using a Lorenz curve diagram. It is calculated as the ratio of the area between the line of perfect equality and the Lorenz curve (designated as area A) to the total area beneath the line of perfect equality (the sum of areas A and B). This relationship is expressed by the formula Gini = A / (A + B).
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A diagram is used to represent the income distribution of a country. The area between the line of perfect equality and the country's distribution curve is calculated to be 0.20. The area under the country's distribution curve is 0.30. Based on this information, what is the Gini coefficient for this country?
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In a diagram representing income distribution, the area between the line of perfect equality and the distribution curve is designated as 'A', and the area under the distribution curve is designated as 'B'. If area 'A' is exactly equal to area 'B', the resulting inequality coefficient would be 0.5.