The Lorenz curve and Gini coefficient
Economists use the Lorenz curve to show how unevenly income or wealth spreads across a population. The Gini coefficient turns that curve into a single number between 0 and 1, where 0 means perfect equality and 1 means one person owns everything.
Formula
Gini Coefficient = A / (A + B)
Real World
South Africa has one of the world's highest Gini coefficients (around 0.63), reflecting extreme post-apartheid wealth concentration, while Denmark sits near 0.28 — economists use these figures to compare inequality across countries instantly.
Exam Focus
When drawing the Lorenz curve, label axes 'cumulative % of population' and 'cumulative % of income/wealth', and shade area A clearly between the curve and the line of equality.
Price Elasticity of Demand
PED = % change in quantity demanded ÷ % change in price
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