Tuesday, April 19, 2011

Lorenz Curve



















http://www.bized.co.uk/reference/diagrams/Lorenz-Curve/
This image is a Lorenz curve and is used for economic analysis of distribution of wealth within countries.  The Y-axis describes cumulative share of income and the X-axis cumulative share of population.  The straight line represents the line of perfect equality and the curved line is lorenz curve.  Following along the lorenz curve will tell the viewer how much of the population holds how much of the cumulative income of the country.  The closer the curved line is to the line of perfect equality, the more equally distributed the wealth is in that country.  In a perfect world the bottom 40% will hold 40% of the total wealth, the top 20% will hold 20% of the wealth and so on.

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