Draw the graphs of two functions f and g that are continuous and intersect exactly twice on an interval [a, b]. Explain how to use integration to find the area of the region bounded by the two curves.
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Textbook Solutions for Calculus: Early Transcendentals
Question
Lorenz curves and the Gini index A Lorenz curve is given by y = L(x), where \(0 \leq x \leq 1\) represents the lowest fraction of the population of a society in terms of wealth and \(0 \leq y \leq 1\) represents the fraction of the total wealth that is owned by that fraction of the society. For example, the Lorenz curve in the figure shows that L(0.5) = 0.2, which means that the lowest 0.5(50%) of the society owns 0.2(20%) of the wealth. (See Guided Projects for more on Lorenz curves.)
a. A Lorenz curve y = L(x) is accompanied by the line y = x, called the line of perfect equality. Explain why this line is given this name.
b. Explain why a Lorenz curve satisfies the conditions L(0) = 0, L(1) = 1, and \(L^{\prime}(x) \geq 0\) on [0, 1].
c. Graph the Lorenz curves \(L(x)=x^{p}\) corresponding to p = 1.1, 1.5, 2, 3, 4. Which value of p corresponds to the most equitable distribution of wealth (closest to the line of perfect equality)? Which value of p corresponds to the least equitable distribution of wealth? Explain.
d. The information in the Lorenz curve is often summarized in a single measure called the Gini index, which is defined as follows. Let A be the area of the region between y = x and y = L(x) (see figure) and let B be the area of the region between y = L(x) and the x-axis. Then the Gini index is \(G=\frac{A}{A+B}\). Show that \(G=2 A=1-2 \int_{0}^{1} L(x) d x\).
e. Compute the Gini index for the cases \(L(x)=x^{p}\) and p = 1.1, 1.5, 2, 3, 4.
f. What is the smallest interval [a, b] on which values of the Gini index lie, for \(L(x)=x^{p}\) with \(p \geq 1\)? Which endpoints of [a, b] correspond to the least and most equitable distribution of wealth?
g. Consider the Lorenz curve described by \(L(x)=5 x^{2} / 6+x / 6\). Show that it satisfies the conditions L(0) = 0, L(1) = 1, and \(L^{\prime}(x) \geq 0\) on [0, 1]. Find the Gini index for this function.
Solution
The first step in solving 6.2 problem number trying to solve the problem we have to refer to the textbook question: Lorenz curves and the Gini index A Lorenz curve is given by y = L(x), where \(0 \leq x \leq 1\) represents the lowest fraction of the population of a society in terms of wealth and \(0 \leq y \leq 1\) represents the fraction of the total wealth that is owned by that fraction of the society. For example, the Lorenz curve in the figure shows that L(0.5) = 0.2, which means that the lowest 0.5(50%) of the society owns 0.2(20%) of the wealth. (See Guided Projects for more on Lorenz curves.)a. A Lorenz curve y = L(x) is accompanied by the line y = x, called the line of perfect equality. Explain why this line is given this name.b. Explain why a Lorenz curve satisfies the conditions L(0) = 0, L(1) = 1, and \(L^{\prime}(x) \geq 0\) on [0, 1].c. Graph the Lorenz curves \(L(x)=x^{p}\) corresponding to p = 1.1, 1.5, 2, 3, 4. Which value of p corresponds to the most equitable distribution of wealth (closest to the line of perfect equality)? Which value of p corresponds to the least equitable distribution of wealth? Explain.d. The information in the Lorenz curve is often summarized in a single measure called the Gini index, which is defined as follows. Let A be the area of the region between y = x and y = L(x) (see figure) and let B be the area of the region between y = L(x) and the x-axis. Then the Gini index is \(G=\frac{A}{A+B}\). Show that \(G=2 A=1-2 \int_{0}^{1} L(x) d x\).e. Compute the Gini index for the cases \(L(x)=x^{p}\) and p = 1.1, 1.5, 2, 3, 4.f. What is the smallest interval [a, b] on which values of the Gini index lie, for \(L(x)=x^{p}\) with \(p \geq 1\)? Which endpoints of [a, b] correspond to the least and most equitable distribution of wealth?g. Consider the Lorenz curve described by \(L(x)=5 x^{2} / 6+x / 6\). Show that it satisfies the conditions L(0) = 0, L(1) = 1, and \(L^{\prime}(x) \geq 0\) on [0, 1]. Find the Gini index for this function.
From the textbook chapter Regions Between Curves you will find a few key concepts needed to solve this.
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