Previous Year Question
Which of the following is measured by the Lorenz curve?
Illiteracy
Unemployment
Population growth rate
Inequality of Income
Correct Answer: D
Detailed Solution
The Lorenz Curve is used to graphically represent inequality in the distribution of income or wealth within a population.
The horizontal axis generally represents the cumulative percentage of population, while the vertical axis represents the cumulative percentage of income. If every individual or household receives income in an equal proportion, the distribution lies along the Line of Equality.
The farther the actual Lorenz Curve bends below the Line of Equality, the greater the inequality in income distribution.
The Gini Coefficient is also an inequality measure related to the Lorenz Curve. It is calculated on the basis of the area between the Lorenz Curve and the Line of Equality. Its value generally ranges from 0 to 1, where 0 represents perfect equality and 1 represents extreme/perfect inequality.