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You are expected to explain/analyze (AO2) the Lorenz Curve and the Gini Coefficient (SL/HL), and draw (AO4) the Lorenz Curve from quintile data (HL)
Lorenz Curve (AO2 + AO4 (HL))
Lorenz Curve (AO2 + AO4 (HL))
The Lorenz Curve represents the inequality of income in a country by showing how much income certain percentages of the population have.
Confused?
Point A is on the linear curve, a country where everyone earns the same amount. At point A, the bottom 60% of the population make 60% of the country's income.
Point B is on the exponential curve, a country where some earn more than others. At point B, the bottom 80% of the population make 40% of the country's income.
Still confused? See the slides below.
Straight Line (perfect equality):
Straight Line (perfect equality):
Curved Line (inequality):
Curved Line (inequality):
If you are an HL student, you are expected to draw a Lorenz Curve using "quintile data". This simply means that you will be given how much money each 5th of society owns (bottom 20% own X, bottom 40% own Y, etc.), and have to draw a curve from that:
Gini Coefficient (AO2)
Gini Coefficient (AO2)
Using the Lorenz curve, you can find the Gini coefficient.
The Gini coefficient is a value that measures income or wealth inequality, in a value ranging from 0 (perfect equality) to 1 (full inequality) using the Lorenz curve.
It does this by finding the area between the perfect equality line (the straight line) and the country's actual line, in this diagram labelled A. Then, the area under the actual line is found, in this diagram labelled B.
The Gini coefficient formula is A / (A + B).
You will not need to calculate this but you should know the formula and the way it works.
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