lorenz curve and gini coefficient (7)

What is a Lorenz Curve?

A graph showing the distribution of income or wealth.

What is shown on the horizontal axis of a Lorenz Curve?

Cumulative percentage of households.

What is shown on the vertical axis of a Lorenz Curve?

Cumulative percentage of income or wealth.

What is the line of perfect equality?

A 45-degree line representing complete equality.

What does perfect equality mean?

Everyone has the same share of income or wealth.

What does a Lorenz Curve below the equality line indicate?

Income or wealth inequality.

How does the shape of a Lorenz Curve indicate inequality?

The more bowed it is away from the equality line, the greater the inequality.

What is the Gini coefficient?

A numerical measure of income or wealth inequality.

What does a Gini coefficient of 0 indicate?

Perfect equality.

What does a Gini coefficient of 1 indicate?

Perfect inequality.

How do you interpret the Gini coefficient?

The higher the value, the greater the inequality.

What relationship exists between the Lorenz Curve and the Gini coefficient?

The Gini coefficient is derived from the Lorenz Curve.

What does the Lorenz Curve graph look like?

x axis: cumulative percentage of the population from poorest to richest (0% to 100%)
y axis: cumulative percentage of total income or wealth held by those people (0% to 100%)
line of perfect equality: 45-degree diagonal line where complete equality exists
lorenz curve: a sagging curve that lies below the line of perfect equality. the more bowed, the higher the level of inequality in society