The Lorenz Curve (the actual distribution of income curve), a graphical distribution of wealth developed by Max Lorenz in 1906, shows the proportion of income earned by any given percentage of the population. The line at the 45ยบ angle shows perfectly equal income distribution, while the other line shows the actual distribution of income. The further away from the diagonal, the more unequal the size of distribution of income.
In the below example, the Lorenz Curve, which represents the actual distribution of income in a country, shows how the poorest 20% of the population only earn 5% of the national income in this population. While in a case of perfect equality, the poorest 20% of the population would make 20% of the income. The more bowed out a Lorenz Curve; the higher is the inequality of income in the country.
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