# Lorenz Curve

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## Definition of 'Lorenz Curve'

The Lorenz curve is a graphical representation of the distribution of income or wealth. It is a curve that plots the cumulative percentage of income or wealth against the cumulative percentage of the population. The Lorenz curve is often used to compare the distribution of income or wealth in different countries or over time.

The Lorenz curve is named after Max Otto Lorenz, a German-American mathematician and statistician who first developed it in 1905. The Lorenz curve is a simple but powerful tool that can be used to visualize and compare the distribution of income or wealth.

The Lorenz curve is a cumulative curve, which means that it plots the cumulative percentage of income or wealth against the cumulative percentage of the population. The x-axis of the Lorenz curve represents the cumulative percentage of the population, and the y-axis represents the cumulative percentage of income or wealth.

The Lorenz curve is a bell-shaped curve that starts at the origin and curves up to the maximum value of 1. The maximum value of 1 represents a perfectly equal distribution of income or wealth, where everyone has the same income or wealth.

In reality, the distribution of income or wealth is never perfectly equal. The Lorenz curve for a country or region will always be below the line of perfect equality. The further the Lorenz curve is from the line of perfect equality, the more unequal the distribution of income or wealth.

The Lorenz curve can be used to compare the distribution of income or wealth in different countries or over time. By comparing the Lorenz curves for different countries, we can see how the distribution of income or wealth has changed over time.

The Lorenz curve is a useful tool for understanding the distribution of income or wealth. It is a simple but powerful tool that can be used to visualize and compare the distribution of income or wealth in different countries or over time.

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