Measuring Income Inequality

Read this article about the Lorenz Curve, which seeks to measure income inequality. Make sure to answer the "Try It" quiz questions, and check your answers.

8. Try It

8.1. Answers to Try It

    • label a; label b only
      Incorrect.
    • label a; labels band
      Correct. A Lorenz curve diagram is represented by a line sloping up at a 45- degree angle (label a) and the other lines reflect actual U.S. data on inequality from the five different quintiles (labels b and c). A Lorenz curve graphs the points along the perfect equity line (label a) which shows what perfect equality of income distribution would look like and compares it to the actual cumulative shares of income received by everyone up to a certain quintile (labels b and c).
    • label a; label c only

      Incorrect.


    • closer to the 45-degree line
      Incorrect. 
    • horizontal to income quintiles on the x-axis line
      Incorrect.
    • farther down and away from the 45-degree line
      Correct. A more unequal distribution of income will loop farther down and away from the 45-degree line, while a more equal distribution of income will move the line closer to the 45-degree line.