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A-Level Economics · Lorenz curve diagram question

What does the straight 45° line represent?

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The answer

Perfect equality — every x% of the population receives exactly x% of the income. On the line, the poorest 50% would take 50% of the income — point G. No real economy looks like that; it is the yardstick everything else is measured against. The 45° line is the line of perfect equality: each slice of the population receives exactly its own share of income. Real distributions sag below it, and the distance between the line and the curve IS the inequality.

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This is one of 6 questions on the lorenz curve diagram — every corner lettered, every wrong answer diagnosed.

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