| Price Theory: Chapter 14 D. Friedman |

| | Twice the area of L on Figure 14-la, called the **Gini** **coefficient**, is a simple measure of how unequal the income distribution of Figure 14-la is. Since the graph is a 1x1 square, its entire area, equal to twice the triangle N on Figure 14-1b, is simply 1. |

| | Both the cumulative income distribution shown on Figure 14-1c and the corresponding **Gini** **coefficient** are the same as for a society where one twelfth of the people have an income of $5,000/year, two tenths have $15,000/year, and so on--with everyone having the same income for his whole lifetime. |

| | The **Gini** **coefficient** as usually calculated tells us how unequal incomes are at one instant in time but does not distinguish between inequality due to different people being in different stages of their earning cycle and inequality due to some people being richer or more talented than others. |

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