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Lorenz Curve and Gini Coefficient definitions

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  • Lorenz Curve
    A graphical tool plotting cumulative household percentages against cumulative income to visualize income inequality.
  • Gini Coefficient
    A numerical measure from 0 to 1 quantifying income inequality, calculated using areas between curves on the Lorenz graph.
  • Income Inequality
    The unequal distribution of income among households, often illustrated by deviations from perfect equality on a graph.
  • Cumulative Percentage
    A running total expressed as a percentage, adding each group’s value to those before it, used on both axes of the Lorenz curve.
  • Quintile
    A segment representing 20% of a population, used to break down income groups for analysis on the Lorenz curve.
  • Line of Perfect Equality
    A diagonal reference line on the Lorenz graph where each population segment receives an equal share of income.
  • Line of Unequal Distribution
    A graphical extreme where all income is concentrated in one household, showing maximum possible inequality.
  • Area A
    The region between the Lorenz curve and the line of perfect equality, used in calculating the Gini coefficient.
  • Area B
    The region under the Lorenz curve but above the horizontal axis, combined with Area A for Gini coefficient calculation.
  • Aggregate Demand
    The total demand for goods and services in an economy, influenced by the distribution of income among households.
  • Fiscal Policy
    Government actions regarding taxation and spending, often shaped by concerns about income distribution and inequality.
  • Economic Stability
    A condition where an economy experiences steady growth and low volatility, potentially affected by income inequality.