Lorenz Curve

In economics, the Lorenz curve is a graphical representation of the cumulative distribution function of the empirical probability distribution of wealth; it is a graph showing the proportion of the distribution assumed by the bottom y% of the values. It is often used to represent income distribution, where it shows for the bottom x% of households, what percentage y% of the total income they have. The percentage of households is plotted on the x-axis, the percentage of income on the y-axis. It can also be used to show distribution of assets. In such use, many economists consider it to be a measure of social inequality. It was developed by Max O. Lorenz in 1905 for representing inequality of the wealth distribution.

The concept is useful in describing inequality among the size of individuals in ecology, and in studies of biodiversity, where cumulative proportion of species is plotted against cumulative proportion of individuals. It is also useful in business modeling: e.g., in consumer finance, to measure the actual delinquency Y% of the X% of people with worst predicted risk scores.