Exercise 2 solution

Formula used (my own, not from the page): sum of absolute differences between every ordered pair, divided by 2 x n squared x mean.

Village A: incomes 10, 20, 30, 40, 100. Total 200, mean 40. Python gives a Gini of 0.4.
Village B: incomes 0, 0, 0, 0, 100. Total 100, mean 20. The sum of absolute differences is 800 (4 zeros against the 100, counted in both orders: 2 x 4 x 100). Divided by 2 x 25 x 20 = 1000, the Gini is 0.8.

Village B is more unequal. A Gini of 0 would mean perfect equality, as the Gini coefficient page says (for example, five households on 40 each).

What the Gini cannot tell you: for example, the actual income levels. The page says it "does not contain information about absolute national or personal incomes", so two villages with very different living standards could have the same Gini. It also cannot say why the incomes differ.