CA Foundation · Business Economics · Indian Economy
The Lorenz curve is used in the study of inequality in India. If the Lorenz curve of income distribution moves closer to the line of equal distribution, what does it indicate?
A Lorenz curve moving closer to the line of equal distribution shows that income inequality has decreased. The line represents perfect equality, so a smaller gap between the curve and the line means income is distributed more evenly. It says nothing directly about average income or the poverty line.
- AIncome inequality has increased
- BIncome inequality has decreasedCorrect
- CThe average income of the population has doubled
- DThe poverty line has been revised upward
Explanation
The Lorenz curve plots the cumulative share of income against the cumulative share of population. The 45-degree line represents perfect equality. When the curve moves closer to this line, the distribution is becoming more equal, so inequality falls. Option A describes the opposite movement, and the curve does not show average income or the poverty line.
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