Show the direction in which the lorenz curve will change

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Reference no: EM131240723

The graph above shows a Lorenz curve for income distribution in the country of Utopia.

a. Label the horizontal and vertical axes on this graph.

b. In words, explain what information is communicated by the numbers shown on this graph.

c. Suppose that the government of Utopia introduces a new tax on the richest 10% of society, and uses the proceeds to supplement the income of the poorest members of society. On the graph, show the direction in which the Lorenz curve will change as a result of the new policy.

Reference no: EM131240723

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