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Lorenz Curve

Economics: Edexcel A A Level, topic 8.1.4

Lorenz Curve

A Lorenz curve shows the cumulative percentage of total income received by the cumulative share of the population.

The Lorenz curve

The Lorenz curve

  • In a Lorenz curve diagram, a more unequal distribution of income is represented below the 45-degree line.
  • A more equal distribution will be closer to the 45-degree line.
Gini coefficient

Gini coefficient

  • The Gini coefficient is a measure of inequality that can be shown on the Lorenz curve.
  • This is equal to Area A ÷ (Area A + Area B).
  • A coefficient of 0 represents perfect equality.
  • A coefficient of 1 represents complete inequality.
  • The Organisation for Economic Co-operation and Development (OECD) said that the UK had a Gini coefficient of about 0.35 in 2017.

Test yourself on Lorenz Curve

  • What does this diagram show?

  • What does a Gini coefficient of 0 show?

  • What does a Gini coefficient of 1 show?

  • How do you calculate the Gini coefficient?

  • Which of these nations have higher Gini coefficients (are less equal)?

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