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Economics

Lorenz curve

This is a curve plotting the graph of cumulative population on the X axis and the cumulative wealth on Y axis. Some examples to illustrate this better. For example in India, maybe the first 90% of the cumulative population has 10% of the cumulative wealth. But the last 10% of the population will have 90% of the wealth.

In an ideal scenario where wealth is equally distributed, the line would be of 45 degrees. The first 10% will have 10% of wealth, 20% will have 20% of wealth, 80% will have 80% of wealth etc.. This is what is called the line of equality. Khan academy

Gini coefficient

Pre read: Lorenz curve

Gini coefficient is the difference in the area between the current lorenz curve of income distribution & the line of equality. Gini coefficient is useful to realize how far away a country is from the perfect equality.

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