Assignment#3 and D3 and T1.docx

Assignment#3 and D3 and T1.docx - Taylor Hitchcock...

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Taylor Hitchcock Assignment#3 1. In the graph drawn above, the diagonal line is the line of equal distribution of income. The curves, L1 and L2 are Lorenz curves. (i) What is measured on the horizontal axis and what is measured on the vertical axis of the graph? (ii) Why is the diagonal regarded as the line of equal distribution of income? (iii) Which Lorenz curve represents greater economic inequality and why? i. For the horizontal axis the cumulative percentage of household would be measured. For the vertical axis the cumulative percentage of wealth would be measured. ii. The diagonal is the line of equal distribution of income because the relationship would be as one moves along the x-axis, each 10 per cent of wealth. iii. In this example, the line that would be drawn would be a straight line emanating from the origin. This line is known as the absolute equality and will have a slope of 45 degrees. Thus, the farther the curve will diverge from the line of equality, the more will be the inequality of income distribution in the society. This means the Lorenz Curve L2 signifies higher income inequality than L1
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2. The Lorenz curve measures inequality in person income distribution.
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