Which of the following best describes the line of perfect income inequality in a Lorenz curve? The line of perfect income inequality is at 0 degrees, because one person has all the wealth.

Understanding the Lorenz Curve While the Lorenz curve is most often used to represent economic inequality, it can also demonstrate unequal distribution in any system. The farther away the curve is from the baseline, represented by the straight diagonal line, the higher the level of inequality.

The Lorenz Curve and the Gini Coefficient If there is a high degree of inequality, then area A will be a bigger percentage of the total area. A rise in the Gini coefficient shows a rise in inequality – it shows the Lorenz curve is further away from the line of equality.

Lorenz curve is mostly used in representing economic inequality. However, it can also be used in representing inequalities in the distribution in any process or system. The level of unequal distribution increases when the Lorenz curve drifts away from the baseline.

• The main advantage of Lorenz curve is that is used for.
• Showing distributing of income among the people.
• Helps with comparing two or more factors of production.
• Helps with comprehending the changes in wages and inequality of income.

In a Lorenz-curve construct, both the horizontal and the vertical axis go from 0% to 100%. It follows that the diagonal of the box traced out by this graph – a 450 line – can serve as the benchmark for a perfectly equal distribution of the thing (e.g., income or health spending) in question.

Real economies exhibit neither complete equality nor complete inequality; a typical Lorenz curve lies below the 45-degree line and above the horizontal axis.

If X is a random variable, for any positive number c the random variable c X has the same Lorenz curve as X. The Lorenz curve is flipped twice, once about F = 0.5 and once about L = 0.5, by negation. If X is a random variable with Lorenz curve LX(F), then −X has the Lorenz curve: L − X = 1 − L X (1 − F)

The Cumulative percentage column divides the cumulative frequency by the total number of observations (in this case, 25). The result is then multiplied by 100. This calculation gives the cumulative percentage for each interval.

In a country with a Gini coefficient of 0, everyone receives exactly the same income. In between 0 and 100, Gini coefficients are harder to interpret. A Gini coefficient of 50 represents 50 percent concentration in a country’s income distribution. Everyone, no matter how poor, has to have some income to live.

South Africa gets $4.3bn IMF loan. In return, the country must reform – The Mail & Guardian.