Draw the Lorenz curves for the United States and the United Kingdom. In which country was income

Draw the Lorenz curves for the United States and the United...

Key Concepts

Income Inequality

Income inequality refers to the extent to which income is distributed unevenly among a population. It is often analyzed using measures like the Lorenz curve or the Gini coefficient, which quantify the gaps between different segments of society in terms of income distribution. Understanding income inequality is essential for evaluating economic policies and their impacts on social equity.

Lorenz Curve

A Lorenz curve is a graphical tool used to represent the distribution of income or wealth within a population. It plots the cumulative percentage of total income received against the cumulative percentage of recipients, ordered from the poorest to the richest. This visual representation helps identify the degree of inequality: the more the curve deviates from the line of equality (a 45-degree line), the more unequal the distribution.

Transcript

00:01 Now we have our households quintile, the lowest, second, third, and the highest for the us and the uk.

00:09 And we have the percentage of total income for each country in 2009.

00:16 So in order to draw our learns curve, we need to get the cumulative percentage.

00:23 I'm going to get it down here.

00:30 Remember that for the cumulative percentage, we need to add up the percentage of the percentage of total income for each quintile.

00:38 So for the lowest we get the same, which is three and three for each country.

00:47 For the us and the uk we get 11 for the us and for the uk.

01:04 Now we need to add up the ones for the third quintile.

01:09 For the us we get 26 and for the uk we get 22 now we need to add up the ones for the fourth quintile for the us we get 50 and for the uk we get 47 and for the highest we get a hundred and a hundred remember that this always needs to happen so we know that we are correct now we're going to plot these points in order to get our lawrence curve.

01:59 Remember that in our lawrence curve in the x axis we have the households our community percentage and on the y -axis we get our income the cumulative percentage.

02:13 So first we're going to draw our equality line and for the low west quintel we should get 20 % of the income our lower quintile it's 20%.

02:26 Our cumulative percentage for the second quintile is 40%, for which we get 40%, 60%, 60%, 80 ,100, so we get our 45 degree line...

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