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Figure 2.7: WS-PS Equilibrium and Corresponding Lorenz Curve
Figure 2.7 illustrates an economy's supply-side equilibrium using a two-panel diagram. The left panel shows the Wage-Setting (WS) and Price-Setting (PS) curves intersecting at point A, where the firm's profit share (σ) is 40%. This equilibrium results in workers receiving 60% of output and 10 people being unemployed. The right panel displays the corresponding Lorenz curve for this income distribution, which includes workers and owners. This curve visualizes the inequality in the economy, quantified by a Gini coefficient of 0.36.
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Introduction to Macroeconomics Course
Ch.2 Unemployment, wages, and inequality: Supply-side policies and institutions - The Economy 2.0 Macroeconomics @ CORE Econ
The Economy 2.0 Macroeconomics @ CORE Econ
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Figure 2.7: WS-PS Equilibrium and Corresponding Lorenz Curve
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