The Lorenz curve is a representation of the distribution of income or wealth within a population. It is a line that plots the cumulative share of income or wealth against the cumulative share of the population.

The closer the Lorenz curve is to the line of perfect equality, the more equal the distribution of income or wealth is. The further the Lorenz curve is from the line of perfect equality, the more unequal the distribution of income or wealth is.

For example, let's say that we have a population of 100 people and that the total income in the population is £100,000. If the distribution of income is perfectly equal, then each person would earn £1,000. The Lorenz curve for this situation would be a straight line that goes from (0%,0%) to (100%,100%).

Alternatively, let's say that the distribution of income is not perfectly equal. Let's say that the top 20% of the population earns 80% of the total income. In this case, the Lorenz curve would be a curve that is below the line of perfect equality. The further the Lorenz curve is from the line of perfect equality, the more unequal the distribution of income is.
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Lorenz curves can be used to compare the distribution of income or wealth over time or between different countries by calculating the Gini Coefficient.

Lorenz Curve Diagram

The Lorenz Curve