Lorenz Curve and Gini Coefficient
 Lorenz curve: A Lorenz curve shows the degree of inequality that exists in the distributions of two variables, and is often used to illustrate the extent that income or wealth are distributed unequally in a particular society. Gini coefficient: A Gini coefficient is a summary numerical measure of how unequally one variable is related to another. The Gini coefficient is a number between 0 and 1, where perfect equality has a Gini coefficint of zero, and absolute inequality yields a Gini coefficint of 1. ______________________________________________________________________ This Lorenz curve illustrates the degree of inequality in the distributuion of income. A Gini coefficient can be calculated using areas on this Lorenz curve. The 45 degree line would reflect absolutely even distribution of income. The pink shaded area A between the line of perfect equality and Lorenz curve reflects inequality. The blue area underneath the Lorenz curve is B, and the Gini coefficient can now be calculated as A/(A+B). Gini coefficients are often expressed as percentages. Although Gini coefficients are used primarily to summarize distributions of income, they are also used to summarize inequalities in market shares by firms in an industry, or in the distribution of wealth.

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