Inequality in Income

Distribution
Umair kashif
19010920-088
 Inequality in Income Distribution
• Income inequality is an extreme disparity of income distributions with a
high concentration of income usually in the hands of a small percentage
of a population. When income inequality occurs there is a large gap
between the wealth of one population segment compared to another.
• In economics, income distribution is how a nation's total GDP is
distributed amongst its population.
• Income inequality is a wide gap between the money earned by the richest
people in an economy when compared to the poorest. Income includes
wages, investment earnings, rent, and sales of real estate.
 Methods to measure Inequality:
There are two main methods to measure inequality of income distribution;
1. Lorenz curve
2. Gini Coefficient
 Lorenz Curve
• Max Lorenz in 1905
• A graph on which the cumulative percentage of total national income (or
some other variable) is plotted against the cumulative percentage of the
corresponding population (ranked in increasing size of share).
• The Lorenz Curve is a graph that illustrates the distribution of income in
the economy.
 Gini Coefficient
• Corrado Gini in 1912
• Statistical measure of distribution
• used as gauge of Economic inequality, measuring income distribution or
wealth distribution among population
• Gini coefficient of zero expresses perfect equality
• Gini coefficient of 1 expresses maximal inequality