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Key Diagrams - The Lorenz Curve

Level:
A-Level, IB
Board:
AQA, Edexcel, OCR, IB, Eduqas, WJEC

Last updated 18 May 2023

In this video we walk through a Lorenz Curve diagram - an important diagram to use when discussing income & wealth inequality.

Key Diagrams - The Lorenz Curve

What is a Lorenz Curve?

The Lorenz Curve illustrates the distribution of income (or wealth). It shows the cumulative share of income from different deciles of the population. If there was perfect equality, then the poorest 20% of the population would gain 20% of total income. The poorest 50% of the population would get 50% of income. Income would fall the line of perfect equality. In reality, income is skewed towards the richer deciles among the population.

Selection of countries – Gini Coefficient (2019 or earlier)
South Africa: 0.63
Brazil: 0.53
USA: 0.48
Mexico: 0.45
UK: 0.35
South Korea: 0.33
Ukraine: 0.26

Income inequality and wealth inequality are related, but they are not the same thing.

Income inequality refers to the unequal distribution of income within a society. It measures how much income different individuals or groups of people earn. It can be measured by looking at the income distribution of a population, and it is often represented by the Gini coefficient, which ranges from 0 to 1, with 0 being perfect equality and 1 being perfect inequality.

Wealth inequality, on the other hand, refers to the unequal distribution of assets and resources within a society. It measures how much wealth (assets such as cash, savings, investments, and property) different individuals or groups of people own. Wealth inequality can be measured by looking at the distribution of wealth across a population, and it is often represented by the concentration of wealth among the top 1% of the population.

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