Enter the current income ($) and the reference income ($) into the Calculator. The calculator will evaluate the Income Gap Ratio.
Income Gap Ratio Formula
IGR = CI / RI
Variables:
- IGR is the Income Gap Ratio ($/$)
- CI is the current income ($)
- RI is the reference income ($)
To calculate the Income Gap Ratio, divide the current income by the reference income.
How to Calculate Income Gap Ratio?
The following steps outline how to calculate the Income Gap Ratio.
- First, determine the current income ($).
- Next, determine the reference income ($).
- Next, gather the formula from above = IGR = CI / RI.
- Finally, calculate the Income Gap Ratio.
- After inserting the variables and calculating the result, check your answer with the calculator above.
Example Problem :
Use the following variables as an example problem to test your knowledge.
current income ($) = 2500
reference income ($) = 2000
FAQ
What is the significance of calculating the Income Gap Ratio?
The Income Gap Ratio helps in understanding the disparity between an individual’s current income and a reference or benchmark income. This can be useful for personal finance analysis, policy-making, and economic research to assess economic inequality and living standards.
Can the Income Gap Ratio be used to compare income levels across different regions or countries?
Yes, the Income Gap Ratio can be used to compare income levels across different regions or countries by using a standardized reference income. This allows for an assessment of income disparity on a broader scale, which can inform economic policies and development strategies.
What does a higher Income Gap Ratio indicate?
A higher Income Gap Ratio indicates a greater disparity between the current income and the reference income. This might suggest that an individual’s income is significantly lower than the benchmark, pointing towards economic inequality or financial stress.
How can individuals and policymakers use the Income Gap Ratio to improve economic conditions?
Individuals can use the Income Gap Ratio to assess their financial health and make informed decisions about income improvement strategies. Policymakers can use it to identify areas with significant income disparities and implement policies aimed at reducing economic inequality, such as education programs, tax reforms, and social welfare initiatives.
