Consider the following distribution of income in a 12 person economy, with the modern urban wage=3, the traditional rural income=1 and the informal urban wage = 2: (1,2,3,1,2,3,1,2,31,2,1). the poverty line is at 1.3.
Based on following information
1) What is the level of absolute poverty in this economy? What policy (only one) would you adopt to mitigate this poverty?
2) Suppose rural incomes are raised to 1.5 though expanded agricultural expects. What will happen to the Gini coefficient of this economy? Why?