The Lorenz curve is the dark red curve in Figure 8 above. On the horizontal axis we have the proportion of the population, and on the vertical axis we have the proportion of total income earned by the corresponding fraction of the population. Thus, the figure tells us that the poorest 20% of the population earned only 3.6% of the income, the poorest 40% of the population earned 12.5 percent of income, and so on. similarly, the least well off 95% of the population earned 78.8% of the income, leaving 21.2% for the richest 5% of income for the richest 5%.
If income were distributed with perfect equality, then the poorest 20% of the population would earn exactly 20% of income, the poorest 40% of the population would earn 40% of income, and the richest 5% of the population would earn exactly 5% of income. As a result, the Lorenz curve for an equal distribution would be a forty-five degree diagonal line, shown by the green line in Figure 8. The curvature of the Lorenz curve, as it droops below the 45 degree line, shows the inequality of the income distribution.
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