Economics • Economic BasicsHard
Analyze the theoretical implications of the Lorenz curve when applied to income distribution data across the four districts of Sikkim. If the curve moves closer to the line of absolute equality, what does it signify regarding the Gini coefficient?
A. An increase in income inequality and a higher Gini coefficient
B. A decrease in income inequality and a lower Gini coefficient✓ Correct Answer
C. No change in overall wealth distribution patterns
D. An expansion of the secondary manufacturing sector
💡 Solution & Explanation
A Lorenz curve approaching the 45-degree line of absolute equality indicates that income is distributed more evenly among the population, corresponding to a reduction in the Gini coefficient value toward zero. Higher Gini values represent severe disparity. Public welfare schemes in Sikkim are designed to flatten the Lorenz curve and promote inclusive growth.
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