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The Lorenz curve was developed by Max O. Lorenz. The Lorenz curve is a visual representation in economics which displays the income distribution of a nation graphically. On the y-axis, you have income distribution (either as a percentage, or in decimal form); on the x-axis, there is population distribution of total wealth. There is an upward sloping, 45 degree reference line that shows perfectly equal distribution of wealth (i.e 25% of the lowest income earners have 25% of the nation's income). From the Lorenz curve, you can calculate the Gini coefficient; the closer the coefficient is to zero, the more distributed the income of a nation is.
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What does the Lorenz Curve illustrate about the economy?
the distribution of income
Can Lorenz curve above the diagonal?
No.The Lorenz curve measures inequality of distribution of income (or wealth). The diagonal represents a distribution that is perfectly equal and you cannot get more equal than that!
What is the lorenz curve and what dose is suggest about the distribution of income on the us?
the Lorenz curve is the curve that illustrates income distribution, the curve states that there is a big income gap between Americans for many reasons: differences in skills and education, inheritances, and field of work. the wealthiest fifth Americans households earned nearly as much income as the four- fifths combined.
How to calculate the Gini coefficient for income distribution?
To calculate the Gini coefficient for income distribution, you need to plot a Lorenz curve showing the cumulative share of income against the cumulative share of the population. The Gini coefficient is then calculated as the area between the Lorenz curve and the line of perfect equality, divided by the total area under the line of perfect equality. The Gini coefficient ranges from 0 (perfect equality) to 1 (perfect inequality).
How can one determine the Gini coefficient for a given dataset?
To determine the Gini coefficient for a given dataset, you can follow these steps: Calculate the cumulative distribution of the dataset. Calculate the Lorenz curve by plotting the cumulative distribution against the perfect equality line. Calculate the area between the Lorenz curve and the perfect equality line. Divide this area by the total area under the perfect equality line to get the Gini coefficient. The Gini coefficient ranges from 0 (perfect equality) to 1 (perfect inequality).
