Economics • Economic BasicsEasy
What does a Lorenz curve graphically represent?
A. The relationship between interest rates and investment demand
B. The trade-off between inflation and unemployment
C. The cumulative distribution of income or wealth against population proportions✓ Correct Answer
D. The downward sloping demand for imported commodities
💡 Solution & Explanation
The Lorenz curve is a graphical representation of income or wealth distribution where the cumulative percentage of households is plotted on the horizontal axis against the cumulative percentage of income earned on the vertical axis. The Gini coefficient is mathematically derived directly from this curve to measure economic inequality. Phillips curves illustrate inflation-unemployment trade-offs, while investment demand curves show interest rate sensitivities.
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