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Exploring Economics 7th Edition

Exploring Economics (7th Edition)

Book Edition7th Edition
PublisherCengage Learning
Section 17.2: Income Redistribution
Section 17.3: The Economics of Discrimination
In Text Question
Chapter 17, Section 17.1, In Text Question, Exercise 01
Page 474

What does the Lorenz curve illustrate?



The solution: Income inequality or wealth inequality


Lorenz curve is defined as a graphical representation of income inequality or wealth inequality that was developed by American economist Max Lorenz in 1905. The graph plots percentiles of the population on the horizontal axis according to income or wealth. The Lorenz curve is sometimes accompanied by a straight diagonal line with a slope of 1, which portrays or depicts a perfect equality in income or wealth distribution; the Lorenz curve lies beneath it, showing the observed or estimated distribution. The area amid the straight line and the curved line, expressed as a ratio of the area under the straight line, is the Gini coefficient, which is a scalar measurement of inequality.



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