The distribution of income in the economy is given in the table below. The first numerical column represents the dollars earned by each quintile. Since the numbers add to 100 you can equally think of the dollar values as shares of the total pie. In this economy the government changes the distribution by levying taxes and distributing benefits.
(a) Plot the Lorenz curve for gross income to scale.
(b) Plot the Lorenz curve for income after taxes have been levied. Note that the total income will now be less than 100 and so you will have to compute the quintile shares using a new total.
(c) Finally, add in the benefits so that the total post-tax and post-benefit incomes sum to $100m again, and plot the Lorenz curve based on this final set of numbers.