You learned that a Lorenz Curve shows the cumulative share of population on the horizontal axis and the cumulative percentage of total income received on the vertical axis. Based on the figure below answer the following:
a) What the perfect equality line means?
b) What do 1980 and 2011 Lorenz Curves tell us regarding the evolution of the US income distribution? JUSTIFY your answer!
Homework Answers
(a)
The perfect equality line is the line that represents the equal distribution of income among population of a country.
(b)
The Lorenz curve indicates the magnitude of income inequality in a country.
Farther the Lorenz curve from the perfect equality line, greater in the income inequality.
It can be seen that Lorenz curve of 2011 is farther from the perfect equality line than the Lorenz curve of 1980.
This means income inequality is greater in 2011 than in 1980.
This indicates tha US income distribution has become more unequal between 1980 and 2011.
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