Question

A Lorenz curve shows the:​ a. ​demand for unskilled labor versus unskilled labor in an economy. b. ​functional distribution of income. c. ​personal distribution of income. d. ​relative percentage of income going to each of the resources used in the production process. e. ​cumulative percentages of income received by cumulative percentages of households.

Answer 1

Answer: Option –(E) cumulative percentages of income received by cumulative percentages of households.

Explanation: Lorenz curve is a graphical representation of showing income inequality. The horizontal axis of the Lorenz curve represents the cumulative percentage of household or population where as the vertical axis represents the cumulative percentage of income or wealth. The Lorenzo curve shows the percentage of income received by cumulative percentage of household or population.     

In the below diagram curve the 45 degree line is known as line of equality shows the perfect equality of income, the Lorenz curve lies below the line of equality shows the actual income distribution. Which is show in the below diagram.