Wednesday, July 13, 2011

Lorenz Curve



Lorenz curves are graphical representations of the cummulative distribution function of the probability distribution of something, in this case wealth. In short it is the proportionality of a distribution between two variables. It uses statistical values to determine its data points on the graph. This is widely used in economic studies. This graph shows the relationship between the percentage of a population and the percentage of income it acquires. Here, 50% of the population is bringing in about 10% of the national total income on average. The perfect equality line represents what would happen if 50% of the population earned 50% of the national total income on average, which is false.

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