Explain the Lorenz Curve used to estimate dispersion graphically. - Vidyadip

Question

Explain the Lorenz Curve used to estimate dispersion graphically.

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Answer

A graphical measure called 'Lorenz Curve' is used to estimate dispersion graphically.

Lorenz Curve uses the information expressed in a cumulating manner to indicate the degree of variability.
It is of special use in comparing the variability of two or more distributions.
On the graph paper take the cumulative percentages of one variable say (income) on the Y axis and cumulative percentages of frequencies (no. of employees) on the X axis. Each axis will have values ranging from '0' to '100'.
Draw a line joining co-ordinate (0, 0) with (100, 100). This is called the 'Line of equal Distribution'.
Now plot the cumulative percentages of the variable with corresponding cumulative percentages of frequency. By joining these points we get the ‘Lorenz Curve Further the 'Lorenz Curve from the line of equal distribution the greater is the variability present in the distribution.
In case of two curves the one which is the farthest from line of equal distribution has higher dispersion.

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