The Lorenz curve is used to represents
Question
The Lorenz curve is used to represents
Solution
The Lorenz Curve is a graphical representation of income or wealth distribution. It was developed by Max O. Lorenz in 1905 for representing inequality of the wealth distribution.
Here are the steps to understand what the Lorenz curve represents:
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The Lorenz curve plots the cumulative percentage of total income received against the cumulative percentage of recipients, starting with the poorest individual or household.
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The x-axis of the Lorenz curve represents the cumulative percentage of households, and the y-axis represents the cumulative percentage of income.
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The 45-degree line (line of equality) represents perfect equality of income distribution. This would mean that 10% of the population earns 10% of the income, 20% of the population earns 20% of the income, and so on.
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The Lorenz curve lies beneath this line of equality, showing the actual distribution of income. The further the Lorenz curve is from the line of equality, the greater the inequality in income distribution.
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The area between the line of equality and the Lorenz curve, divided by the total area under the line of equality, gives the Gini coefficient, a measure of income inequality.
So, in summary, the Lorenz curve is a tool used by economists to illustrate the distribution of income or distribution of wealth within a society.
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If the government increases tax rates to the richest households in the distribution, then the Lorenz curve should shift ____________ and the Gini coefficient should ______________.Selected answer will be automatically saved. For keyboard navigation, press up/down arrow keys to select an answer.atoward the diagonal; decreasebaway from the diagonal; increasectoward the diagonal; increasedaway from the diagonal; decreaseeto a straight line; increase
According to the Lorenz curve depicted here, which of the following statements is true? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer.aThe bottom 40% of households earn less than 20% of all income.bThe bottom 20% of households earn 20% of all income.cThe society shown here has complete income equality.dThe more the curve sags downward, the greater income equality.
Which point on the curve do you advocate for and why?
A(n) curve that is farther from the origin is preferred to one that is closer to the origin.
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