Question

Which of the following observations would be valid if the Gini coefficient is equal to one? Perfect income inequality O Greater degree of income equality O Lorenz curve overlaps the line of perfect income equality O equal distribution of income.

Answer 1

Step-by-step explanation:

If the Gini coefficient is equal to one, it indicates perfect income inequality. In this scenario, all income in the population is concentrated in the hands of a single individual or group, while the rest of the population has no income. This implies an extreme level of income disparity, with one individual or group possessing all the wealth and income, while others have none.

A Gini coefficient of one signifies the highest possible level of income inequality, with no income distribution among the majority of the population. The Lorenz curve, which represents the cumulative share of income against the cumulative share of the population, would lie along the line of perfect income inequality. This means that the Lorenz curve would be a straight diagonal line, indicating that the distribution of income perfectly matches the population distribution, with no sharing or redistribution of wealth.

In summary, a Gini coefficient of one implies a complete absence of income equality and an extremely unequal distribution of income, where all income is concentrated in the hands of a single individual or group while the rest of the population has no income.