Problem -
The Table below gives the income of each of four individuals who are in a region. Calculate and plot the Lorenz curve and calculate the Gini coefficient for this economy.
|
individual
|
income
|
|
1
|
100
|
|
2
|
200
|
|
3
|
300
|
|
4
|
400
|
Two identical individuals have the following utility function; Utility=income. Total income in the economy is 100. How would you share the 100 units of income across the two individuals so that the sum of individual utilities in the economy are maximized. Repeat part (a) but now assume the utility function is; utility=income^0.5.