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Suppose country A has 100 citizens with two income groups
Suppose country A has 100 citizens with two income groups. There are 10 people in high income group who make $90,000 a year and the rest are in the low income group and make $10,000 a year. Suppose country B has 100 citizens with two income groups. There are 10 people in high income group who make $99,000 a year and the rest are in the low income group and make $9,000 a year. Suppose country C has 100 citizens with two income groups. There are 5 people in high income group who make $105,000 a year and the rest are in the low income group and make $10,000 a year. 1. What is the Gini coefficient of country A? 2. What is the Gini coefficient of country B? 3. What is the Gini coefficient of country C? 4. Which country has the lowest inequality as defined by the Gini coefficient? 5. Which country would you rather live in? Explain.
Expert Solution
1
Country A, Citizzen = 100 , high income = 10 , high income earning = 90000 , low income earning = 10000
total income of high income group = 10*90000 = 900000
number of low income group people = 100 - 10 = 90
total income of low income group = 90*10000 = 900000
total income of country = 1800000
low income group share in population = 90/100 = 0.9
high income group share in population = 10/100 = 0.1
low income group income share = 900000/1800000 = 0.5
high income group income share = 0.5
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