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Question

Difficulty: EasyPoverty Estimation, Inequality Metrics, and Inclusive Growth Strategies

Which economic curve graphically represents the cumulative distribution of income or wealth in a population to measure inequality?

  1. Lorenz CurveAnswer
  2. B
    Phillips Curve
  3. C
    Laffer Curve
  4. D
    Engel Curve

Answer

The Lorenz Curve is the graphical representation of income or wealth inequality within a population.
The Lorenz Curve is the standard graphical representation of wealth or income distribution. Developed by Max O. Lorenz in 1905, it plots population percentiles against cumulative income. The area between the line of perfect equality and the Lorenz curve determines the Gini coefficient.

Step-by-Step Solution

1
Identify the core subject of the question
The question asks for the specific graph used to visually depict income distribution and inequality.
Different economic curves illustrate distinct macro and microeconomic relationships.
2
Evaluate the definition of the Lorenz Curve
The Lorenz curve compares the cumulative percentage of population (x-axis) with the cumulative percentage of income earned (y-axis). A line of perfect equality (45-degree line) serves as the baseline.
The deviation of the Lorenz curve from the 45-degree line measures the degree of income inequality, which forms the basis for calculating the Gini Coefficient.

Key Concept

Lorenz Curve and Inequality Measurement
Estimated Time:45s
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Topics

Poverty Estimation, Inequality Metrics, and Inclusive Growth Strategies