Draw a Lorenz curve and explain its significance.
A Lorenz curve is used to show the degree of income inequality in an economy.
The diagonal line in the diagram represents perfect equality in income distribution, as it shows that if income were perfectly equally distributed.
The Lorenz curve plots the actual relationship between percentages of the population and the shares of income they receive.
In general, the closer a Lorenz curve is to the diagonal representing perfect income equality, the greater is the equality in income distribution.
