Answer to Question #214199 in Economics of Enterprise for Esha

Question

There are two countries “Spain” and “Portugal”. If we plot their Lorenz curves, the Lorenz Curve of Wakanda is closer to perfect equality line and Korea’s Curve is far from it. What is situation tells us abour Wakanda and Korea.

Answer 1

For Wakanda, the Lorenz curve being closer to the perfect equality line, this implies that there is low level of inequality in the distribution of wealth and also income.

For Korea, the Lorenz curve being far away from the perfect equality line, this implies that there is a high level of inequality in wealth and income distribution.

The Lorenz curve provides intense information about wealth or income distribution in both of the cases stated.