If the Area Between the Line of Equality and the Lorenz

question 80

Multiple Choice

If the area between the line of equality and the Lorenz curve is 1,000, and the entire area beneath the line of equality is 5,000, the Gini ratio is

• A) 0.8
• B) 0.1
• C) 0.2
• D) 0.5

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Definitions:

Consumer Surplus

The mismatch between the aggregate amount consumers intend and can afford to pay for a product or service and the aggregate amount they really pay.

Producer Surplus

The difference between the amount a producer is willing to accept for a good versus what they actually receive in the market.

Producer Surplus

The difference between what producers are willing to accept for a good or service versus what they actually receive, often measured by the area above the supply curve and below the market price.

Demand Curve

A graph showing the relationship between the price of a good and the quantity of that good that buyers are willing to purchase, assuming all other factors remain constant.