Gini Coefficient

In our economy theres no such thing as everyone receive equal income. For 50% of poor population,
they receive 50% of total income in this country but the rich get the most income which is a minor
30% of the population. So, in this case we are going to calculate equality of income distribution using
a mathematical tool called the Gini Coefficient.

Gini Coefficient, G = A/A+B

A = area inside the Lorenz Curve

B = area outside the Lorenz Curve

There is two condition for Gini Coefficient which is if A is equal to zero so G = 0, so this is called a
perfect inequality income distribution but in another condition which is B equal to zero so G = 1
because A is not zero so this condition is called a perfect equality income distribution. This correlates
to Lorenz Curve which is if the Lorenz Curve is closer to the perfect equality this is considered as the
economy is much better. But in most countries, the value of Gini Coefficient is between 0 to 1.Refer
to Graph 1.1 for better understanding.

Graph 1.1 Income Equality Graph