In a certain country, the population consists of five blue people and five green people. Each green person has an income of $2 per year. Each blue person has an income of $6 per year.
a. Draw the Lorenz Curve for this country.
b. On your diagram from Part a, indicate clearly which area you would divide by which other area to calculate the Gini Coefficient.
c. Calculate the Gini Coefficient. Show your work.
d. (Difficult) Consider a country with only two groups: the Poor and the Rich. The poor are x% of the population and rich are (1-x)% of the population. The poor earn y% of the country’s total income. The rich earn (1-y)% of the country’s total income.
An economist said: "The Gini Coefficient of this country is: (x – y)." Is the economist correct? Explain.