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    Analyzing changes in wealth distribution

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    Consider a 12-person stylized dual economy with the following income distribution:
    (1,1,1,1,1,1,1,1,1,4,4,4,4)
    1- Graph the Lorenz curve.
    2- Calculate The Gini coefficient
    3-Now suppose the incomes of two members increase from 1to 4. Graph the Lorenz curve (you may use your graph in part1, distinguish which curve applies here.)
    4- what kind of growth is this: traditional sector enrichment, modern sector enrichment, modern sector enlargement, or modern sector international effect?
    5- Can you say what has happened to inequality?
    -Suppose everybody increases by 10%. what happens to inequality? justify the answer.

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    https://brainmass.com/economics/income-distribution/analyzing-changes-in-wealth-distribution-427339

    Solution Preview

    Consider a 12-person stylized dual economy with the following income distribution:
    (1,1,1,1,1,1,1,1,4,4,4,4)
    1- Graph the Lorenz curve.
    First we find the total wealth in the economy: 8+ 16 = 24
    Each person with an income of 1 has 1/24 = 4% of the wealth and represents 1/12 = 8% of the population
    Thus our first point will be at 8 and 4.
    As we proceed, we find that 50% of the population has 6/24 = 25% of the wealth. So we will find a point at 50% on the x axis and 25% on the y axis.
    At 75% of the population, we find that total income is now: 12/24 = 50%
    You can plot these data using Excel, as shown in the attached file. Excel will then generate a scatter plot, giving the Lorenz curve. See the attached file. The Lorenz curve is shown in red squares.
    2- Calculate The Gini coefficient
    The Gini coefficient is the ...

    Solution Summary

    Lorenz curve graphing, Gini coefficient, determination of growth pattern, and changes in inequality.

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