Lorenz Curve
•This is a graphical measure of income distribution and income inequality.
•The information required to draw a Lorenz Curve consists of a frequency table showing the distribution of income by decile groups of households.
•To draw a Lorenz Curve, the cumulative percentage of income receiving households is represented on the horizontal axis, the cumulative percentage of aggregate income on the vertical axis, and the curve represents the locus of all the combinations of the two cumulative percentages.
•The diagonal line represents a perfectly equal distribution of income and, hence, is known as the line of equality.
•In general, the farther the Lorenz Curve is from the line of equality, the higher the degree of income inequality is.
Lorenz Curve•This is a graphical measure of income distribution and income inequality.•The information required to draw a Lorenz Curve consists of a frequency table showing the distribution of income by decile groups of households.•To draw a Lorenz Curve, the cumulative percentage of income receiving households is represented on the horizontal axis, the cumulative percentage of aggregate income on the vertical axis, and the curve represents the locus of all the combinations of the two cumulative percentages.•The diagonal line represents a perfectly equal distribution of income and, hence, is known as the line of equality.•In general, the farther the Lorenz Curve is from the line of equality, the higher the degree of income inequality is.
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