The Lorenz curve is a graph that shows how income or wealth is distributed across a population. It is a common tool used to visualize and measure inequality.

Key features of the graph:

• The horizontal axis represents the cumulative percentage of households, ranked from the poorest to the richest.
• The vertical axis represents the cumulative percentage of total income received by those households.
• The line of perfect equality is a straight, 45-degree diagonal line. If every household earned the exact same income, the Lorenz curve would follow this line perfectly.
• The actual Lorenz curve usually bows downward below the line of equality. The further the curve sags away from the diagonal, the higher the level of inequality in that population.
• The gap between the curve and the diagonal line represents the degree of economic inequality.
• Economists use these curves to compare wealth distribution between different countries or to track changes in a single country over time.
• The Gini coefficient is a single number calculated based on the area between this curve and the line of perfect equality; it provides a quick summary of how unequal a society is.