Activity: Calculating Gini Coefficients with Diagrams

Calculating Income Inequality in a Small Economy

Consider a small economy with four individuals. Their annual incomes are $10, $20, $30, and $60. Based on the principle of calculating the Gini coefficient from the average income difference between all pairs of individuals, what is the Gini coefficient for this economy?

Analyzing Changes in Income Inequality

Consider a small economy consisting of three individuals with incomes of $2,000, $8,000, and $14,000. If the wealthiest individual gives $3,000 to the poorest individual, the Gini coefficient for this economy will decrease.

Match each three-person economy, described by the annual incomes of its individuals, to its corresponding Gini coefficient. The Gini coefficient is calculated as half the ratio of the average income difference between all pairs of individuals to the population's average income.

To calculate the Gini coefficient for a small population, you must follow a specific sequence of calculations based on the principle of comparing incomes between all pairs of individuals. Given a three-person economy with incomes of $10,000, $20,000, and $60,000, arrange the following steps into the correct logical order required to find the Gini coefficient.

Consider a small economy with three individuals whose annual incomes are $2,000, $4,000, and $12,000. The Gini coefficient, calculated as half the ratio of the average income difference between all pairs to the population's average income, is approximately ____. (Round your answer to two decimal places).

Evaluating Policy Proposals to Reduce Income Inequality

Consider four different three-person economies, each with the same total annual income of $120. The Gini coefficient is calculated as half the ratio of the average income difference between all pairs of individuals to the population's average income. Which of the following income distributions would result in the highest Gini coefficient, indicating the greatest level of income inequality?

Reconstructing an Economy's Income Distribution

Sensitivity of the Gini Coefficient to Income Redistribution