Which issue does the Lorenz Curve illustrate?

Which issue does the Lorenz Curve illustrate?

• A. Private Cost
• B. The Distribution of Income Across Individuals
• C. The Level of Inflation
• D. The Unemployment Rate

Answer: (B)

The Lorenz Curve shows how income or wealth is distributed across people. It graphs the cumulative share of income (vertical axis) against the cumulative share of the population (horizontal axis). If everyone had the same income, the curve would sit on the 45-degree line of equality; the more the curve bows away from that line, the greater the inequality. So its purpose is to illustrate the distribution of income across individuals. It’s not about private costs, inflation, or unemployment rates, which are different economic measures.

The Lorenz Curve shows how income or wealth is distributed across people. It graphs the cumulative share of income (vertical axis) against the cumulative share of the population (horizontal axis). If everyone had the same income, the curve would sit on the 45-degree line of equality; the more the curve bows away from that line, the greater the inequality. So its purpose is to illustrate the distribution of income across individuals. It’s not about private costs, inflation, or unemployment rates, which are different economic measures.