Question

Lorenz Curve

2) The graph below shows the Lorenz Curve. 60% 50% 10% 0% 20% 30% 50% 60% 70% 100% a) Label both axes right in the graph (type it in the given text boxes). b) Label both curves right in the graph. (type it in the given text boxes) c) Which area in the graph shows the degree of income inequality in this country? You Answer: (2 points) (2 points) can either shade it right in the graph or explain in words. If you choose the latter, points) Answer: make sure your explanation is very clear. Answer:

Answer 1

a) Both axes are labelled in the graph below. Both the axes show commulative percentage.

X axis shows commulative percentage of population from poorest to richest .

Y axis shows Commulative percentage of income.

90 80 70 50 Lto t 30 20 lo o lo 20 o toso GoTO 809o lo

b) The graph with green line in the question is the line of equality as shown in the graph ie a 45° line where there is no income inequality. while the curved line is the Lorenz curve which bows out more when inequality increases.

c) The shaded area in the graph above is the degree of income inequality as marked . It reflects how much an economy is far from equality as it is the distance between the lorenz curve and line of equality.

(You can comment for doubts)