Economics • Economic BasicsMedium
What does the 'Lorenz Curve' graphically illustrate in welfare economics?
A. The inverse relationship between inflation and unemployment
B. The trade-off between economic growth and environmental degradation
C. The cumulative percentage of total income against the cumulative percentage of population✓ Correct Answer
D. The marginal propensity to consume across different income brackets
💡 Solution & Explanation
The Lorenz Curve is a graphical representation of income or wealth distribution, plotting the cumulative percentage of total national income received against the cumulative percentage of the population. The Gini coefficient is mathematically derived directly from the Lorenz curve to quantify economic inequality. Perfect equality is represented by a diagonal line of absolute equality.
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