Scale Invariance of an Inequality Measure
Two small economies, A and B, each have three individuals. The incomes in Economy A are $10,000, $30,000, and $50,000. The incomes in Economy B are $20,000, $60,000, and $100,000. Without performing the full calculation, explain how the Gini coefficient for Economy A would compare to the Gini coefficient for Economy B. Justify your answer by referencing the components of the formula, which is based on the average difference between all pairs of individuals relative to the mean income.
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Calculating Income Inequality in a Small Economy
Consider a small economy with three individuals who have annual incomes of $10, $20, and $50. Using the formula based on the average difference between all pairs of individuals, what is the Gini coefficient for this economy?
Consider a population where income is unequally distributed. If a fixed amount of money is given to every single individual (for example, as a universal basic income payment), the Gini coefficient of the new, higher income distribution will be lower than the original Gini coefficient.
Scale Invariance of an Inequality Measure