Consider the following statements with respect to Lorenz curve
1. The larger the area under the curve, lesser is the inequality
2. Gini coefficient gives a measure of this inequality
A
1 only
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B
2 only
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C
Both 1 and 2
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D
None of the above
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Solution
The correct option is C Both 1 and 2 The distribution of Income in an economy is represented by the Lorenz Curve . Gini Coefficient, which is derived from the Lorenz Curve, can be used as an indicator of economic development in a country. The Gini Coefficient measures the degree of income equality in a population. The Gini Coefficient can vary from 0 (perfect equality) to 1 (perfect inequality). A Gini Coefficient of zero means that everyone has the same income, while a Coefficient of 1 represents a single individual receiving all the income.