What is Lorenz's curve?
Lorenzo curve is a simple graphic representation of inequality. It represents the way in which the variable is distributed in proportion to the set of units. Lorenz's curve is often used to describe social inequalities, but has also been appropriated by other fields. It was invented in 1905 Max Lorenz. Both axes represent percentages and are thus numbered from zero to 100 or zeros to one. The x -axis usually represents an individual's population. The Y axis describes a source or function that individuals have on the x -axis in different levels. Individuals on the X axis are evaluated according to the variable on the Y -axis.
The result is a curve lying somewhere between a straight diagonal line and an angle of ninety degrees. The direct diagonal line represents the most capable equality. Has a slope of one; It always has the same value for x and y. The result of this line is the member of the population does not differ according to the variable on the Y -axis. The opposite condition, complete inequality, tends to zero until it reaches the end of the x -axis, at this point it suddenly becomes vertical. ThisThe condition indicates that only one member of the population has one of the resources or assets on the Y axis. All curves in the meantime represent medium inequality.
The most common use of Lorenz's curve is economics. The x -axis represents households and axis y corresponds to their income. The lines of this graph correspond to ideas as "the poorest 40% of households earn 15% of the total income". The further the curve from the direct diagonal line, the worse the inequality. Because it is two -dimensional, the graph represents more than just a lot of inequality. It can show where the inequality line is drawn in the population. It can also reinforce NT as gradual or heavy.
Economists use the number called Gini's coefficient to summarize the inequality represented by the Lorenz curve. The Gini coefficient is calculated by distributing the area between the actual curve and the line of perfect equality of the total triangle surface below the line. GINI coefficient cane drop anywhere between zero and once, move from complete equality to complete inequality. The performance of this calculation for the economies in the real world provides a number of results, while Northern Europe at the bottom and Africa and South America above.