Lorenz Curve, its Construction, Application of Lorenz Curve | Measures of Dispersion
🚩Timestamps:-
00:11 Session Agenda
01:00 Lorenz Curve
06:51 CONSTRUCTION OF LORENZ CURVE
11:21 drawing lorenz curve: a graphical method of studying Dispersion
23:28 APPLICATION OF LORENZ CURVE
27:25 Concluding Remarks
Learning Outcomes:-
Through this module, you will gain understanding
on:-
1. Lorenz Curve
2. CONSTRUCTION OF LORENZ CURVE
3. drawing lorenz curve: a graphical method of studying
Dispersion
4. APPLICATION OF LORENZ CURVE
Lorenz Curve
·
Lorenz curve is
another important measure of variability of the statistical series.
·
This curve was first
used by Max Lorenz. Hence, it is called Lorenz
Curve
·
These curves are
generally used to measure variability in the distribution of income and wealth
·
Lorenz curve is a
measure of deviation of actual distribution from the line of equal distribution.
This is a cumulative percentage curve.
·
The extent of deviation
of the actual distribution from the equal distribution is called Lorenz coefficient.
·
Greater the
distance of Lorenz curve from the line of equal distribution, more is the
inequality or variability in its series.
·
on the other hand,
closer is the Lorenz curve to the line of equal distribution, lower will be the
variability or degree of inequality.
What is Lorenz Curve?
It is a curve that shows
deviation of actual distribution (of income or wealth) from the line showing
equal distribution.
CONSTRUCTION OF LORENZ CURVE -
Following steps are
involved
1. First of all, the series is converted into a
cumulative frequency series. The cumulative sum of the items (or mid-values of
class intervals) is assumed to be 100 and the different items are converted
into percentages of the cumulative sum. Likewise, cumulative sum of the
frequencies is assumed to be 100 and different frequencies are converted into
percentages of the sum of the frequencies.
2. Cumulative frequencies are plotted on X-axis of a
graph, while cumulative items are plotted on the Y-axis.
3. On both axes, we start from 0 to 100 and both X and Y
axes take the values from 0 to 100.
4. Draw a diagonal line joining the origin (0, 0) with
the cumulative frequencies (100, 100). This shows equal distribution. It is,
therefore, called 'Equality Line' or Line of Equal Distribution
5. Actual data are plotted on the graph and a curve is
obtained by joining different points. This curve shows actual distribution.
6. The actual distribution curve is called Lorenz curve.
·
Closeness of
Lorenz curve to the Equal Distribution Line shows lesser variation in the
distribution.
·
Larger the gap
between the actual distribution curve and the Lorenz Line, greater is the
variation.
· If two Lorenz curves are drawn on the same graph paper, the one which is further away from the equal distribution line shows greater variation.
APPLICATION OF LORENZ CURVE
·
Lorenz Curve is a
graphic measure of dispersion in a statistical series.
·
It is a very
simple measure and provides an immediate glimpse of the degree of variation in
a statistical distribution from its mean value. (equal distribution line)
·
It was first used
by Prof. Lorenz for the measurement of economic inequality relating to the
distribution of income and wealth across different nations or across different
periods of time for the same nation.
·
With the passage
of time, the application of Lorenz curve has widely spread to measure disparity of distribution relating to various parameters like
distribution of profits and wages.
lack of similarity or equality; inequality; difference
·
Briefly, Lorenz
curve as a measure of dispersion is presently applied to the following
parameters, viz.,
1.
distribution
of income
2.
distribution
of wages
3.
distribution
of wealth
4.
distribution
of profits
5.
distribution
of production
6.
distribution
of population
VIDEO DESCRIPTION (max 5,000 characters)
Lorenz Curve, CONSTRUCTION OF LORENZ CURVE, drawing lorenz curve: a graphical method of studying Dispersion, APPLICATION OF LORENZ CURVE | Measures of Dispersion | 11th Commerce | by @statomics11comm
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Lorenz Curve - Measures of Dispersion | Class 11 Economics - Statistics
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