Lorenz curve , Applied Statistics

Lorenz Curve  

1014_lorenz curve.jpg

It is a graphic method of measuring dispersion. This curve was devised by Dr. Max o Lorenz a famous statistician.  He used this technique for wealth it is used to show inequality of wealth and income of a group of people. It is a simple attractive and effective measure of dispersion yet it is not scientific since it does not provide a figure to measure dispersion. The following procedure is followed in plotting the curve on a graph paper:

(1) The values given in a question or mid values are made cumulative. The percentages of different cumulative totals are computed taking last cumulative item as 100.

(2) The frequencies are also cumulated and percentages of cumulative frequency are calculated taking last cum. Frequencies are shown on and percentages of cumulative values on y axis.

(3) Percentages of cumulative frequencies   are shown on x-axis and percentages of cumulative values on y- axis.

(4)  The scale on x-axis will begin with 100 and proceed to zero and the scale on y- axis will start with 0 and proceed up to 100.

(5) A straight line is drawn going 0 on x- axis and the  point 100 on y-axis this line is called line of equal distribution.

(6) Then points are plotted   on the graph paper on the basis of calculated percentages on x-axis and y-axis. All the points are joined by a line called Lorenz curve.

(7) The greater is the distance between the curve and the line of equal distribution, the greater will be the dispersion. The nearer curve will mean less dispersion.

Posted Date: 9/27/2012 6:12:52 AM | Location : United States

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