Question

Describe how a country can measure its income inequality.

Answer 1

One of the best way to measure income income inequality in a country is LORENZ CURVE.

Lorenz curve is a graphical method to measure income inequality. On the y-axis cumulative % income is given and on x-axis % of household by income is given.

A 45° degree line connects the two opposite corner (as given in the picture below) represent the line of equality and the linear curve is Lorraine curve. Closer the curve is to the line of equality less inequality in the country exist and greater the depth of the curve is greater the inequality exist in the country.

Example suppose in a country 90% of population have the wealth about 55% of country's income which means 10% of population have 45% of income . in this case lorenz curve will far away from line of equality and which means greater amount of inequality exist in the country.