Income Distribution Lorenz Curve

It was developed by max o.

Income distribution lorenz curve. The lorenz curve is a way of showing the distribution of income or wealth within an economy. This information can be put in terms of the cumulative proportion of income and cumulative proportion of families. The lorenz curve also called relative concentration curve is widely used for the representation and analysis of the size distribution of income or wealth. Lorenz in 1905 for representing wealth distribution.

Conclusion to conclude by summarizing what we have learned introduced more than 100 years ago the lorenz curve provides an innate and complete understanding of the income distribution and provides the basis for inequality measurements through the gini index. With regard to this macroeconomic goal the distribution of income or wealth in an economy is represented by a lorenz curve. Consider the following table on the income distribution of families in 1994. Lorenz in 1905 for representing inequality of the wealth distribution.

The gini index measures the area between the lorenz curve and a hypothetical line of absolute equality expressed as a percentage of the maximum area under the line. Deviations of the actual cumulative distribution the so called lorenz or concentration curve from the 45 0 line then denotes the degree of inequality of the thing income earned or health spending or physician visits being explored. It was developed by max o. The lorenz curve is obtained by plotting the cumulative percentage of the nation s income against the cumulative percentage of the nation s households or population receiving this income.

Lorenz curves graph percentiles of the population against cumulative income or wealth of. It relates the cumulative income wealth fraction earned by various proportions of the population to the proportion receiving this income when the units are arranged in increasing order of their income wealth. A lorenz curve is a graphical representation of the distribution of income or wealth within a population. Generally income is represented on the vertical axis of the diagram and households or popu lation on the horizontal axis as shown in fig.

The lorenz curve shows the cumulative share of income from different sections of the population. A lorenz curve plots the cumulative percentages of total income received against the cumulative number of recipients starting with the poorest individual or household. Lorenz curve definition one of the five major and common macroeconomic goals of most governments is the equitable fair distribution of income which is a crucial element of a functioning democratic society. In economics the lorenz curve is a graphical representation of the distribution of income or of wealth.

The variation of income over the lifecycle of an individual is ignored by the lorenz curve while determining the inequality.