The correct answer is: TRUE.
The Gini index is a measure of inequality that ranges from 0 to 1, where 0 represents perfect equality and 1 represents perfect inequality. It is calculated by taking the area between the Lorenz curve and the line of perfect equality, and dividing it by the area under the line of perfect equality.
The Lorenz curve is a graph that shows the cumulative distribution of income or wealth. It is created by plotting the cumulative percentage of income or wealth on the y-axis and the cumulative percentage of people on the x-axis. The line of perfect equality would be a diagonal line from the bottom left corner to the top right corner.
The Gini index is a useful measure of inequality, but it has some limitations. One limitation is that it is not very sensitive to changes in inequality when the number of classes is large. This is because the Lorenz curve becomes very flat when there are many classes.
Another limitation of the Gini index is that it is not very easy to interpret. The Gini index of 0.4 does not mean that 40% of the population is poor. It means that the bottom 40% of the population has 40% of the income.
Overall, the Gini index is a useful measure of inequality, but it has some limitations. It is not very sensitive to changes in inequality when the number of classes is large, and it is not very easy to interpret.
Here is a brief explanation of each option:
- Option A: When the number of classes is large Gini index is not a good choice. This is because the Lorenz curve becomes very flat when there are many classes, and the Gini index is not very sensitive to changes in inequality when the number of classes is large.
- Option B: When the number of classes is large Gini index is a good choice. This is not true, because the Gini index has some limitations, such as not being very sensitive to changes in inequality when the number of classes is large.