In a Lorenz curve diagram, the size of the area between the Lorenz curve and the diagonal line represents
A) complete income equality.
B) the percentage of income received by the top 5 percent of families.
C) the percentage of income received by the bottom 20 percent of families.
D) the dollar incomes of the bottom 40 percent of families.
E) the degree of inequality in the distribution of income.

Question

Quizplus · Accepted Answer

The Lorenz curve is used to measure the degree of inequality in the distribution of income. The closer the curve is to the diagonal line, the more equal the distribution of income is. The size of the area between the Lorenz curve and the diagonal line represents the degree of inequality - the larger the area, the greater the degree of inequality. Therefore, choice E is the best answer.

In a Lorenz Curve Diagram, the Size of the Area