LORENZ CURVE

• MEANING
Lorenz Curve is a graphic method of studying dispersion. It is also
called ‘Dispersion Curve’. It is cumulative frequency curve based on
percentages.

• MERITS OF LORENZ CURVE

1. EASY TO UNDERSTAND: Lorenz Curve is easy to understand
because just by observation one can get idea about dispersion.
2. ATTRACTIVE AND EFFECTIVE: Lorenz Curve is an attractive and
effective graphic method, which creates instant effect on mind.
3. COMPARATIVE STUDY: Dispersion of two or more series can
easily be compared by this method.

• DEMERITS OF LORENZ CURVE

1. LACK OF QUANTITATIVE MEASUREMENT: Lorenz Curve gives
only a relative idea of the dispersion as compared with the line of
equal distribution. It does not provide any numerical value of the
variability.
2. LENGTHY PROCESS: It is a lengthy process. All values and
frequencies are to be cumulative. they are converted into
percentages and then curves are drawn on a graph paper.

• USES OF LORENZ CURVE

Lorenz Curve is widely used in studying the inequalities in the distribution
of income, wealth, wages, profits etc..

• METHODS OF STUDYING DISPERSION BY LORENZ CURVE

1. If the Lorenz Curve lies on the line of equal distribution, there is no
dispersion and the distribution is proportionately equal.
2. The greater is the distance between the Lorenz Curve and the line
of equal distribution, the greater will be the dispersion. Similarly, the
nearer the curve the lesser will be the dispersion.
3. If two or more Lorenz Curve are drawn on the same graph the curve
that is at a greater distance from the line of equal distribution, will
represent greater variability in the series.