In economics, the Lorenz curve is a graphical representation of which of the following economic concepts?

Introduction / Context:
The Lorenz curve is a well known graphical tool in economics and statistics used to study inequality. It helps visualise how a variable such as income or wealth is distributed across a population. Understanding what the Lorenz curve represents is important in discussions of poverty, social justice, and economic development. This question asks candidates to recall the primary economic concept that the Lorenz curve is designed to depict.

Given Data / Assumptions:

• The options include employment, inflation, deflation, and income distribution.
• The Lorenz curve is drawn on a graph with cumulative population share on one axis and cumulative income or wealth share on the other.
• We assume the standard use of the Lorenz curve in inequality and distribution analysis.

Concept / Approach:
The Lorenz curve plots the cumulative percentage of total income received against the cumulative percentage of the corresponding population, starting from the poorest to the richest. If everyone had exactly the same income, the Lorenz curve would coincide with the line of perfect equality. The more the Lorenz curve bows away from this line, the greater the inequality in income distribution. This curve is closely related to the Gini coefficient, which quantifies the degree of inequality. It does not directly describe employment, inflation, or deflation, which are different macroeconomic variables.

Step-by-Step Solution:
Step 1: Recall the basic definition: the Lorenz curve is a plot relating cumulative population share to cumulative income or wealth share.Step 2: Understand that this curve is used to see how total income is distributed across different segments of the population.Step 3: Employment levels concern how many people have jobs, which is not the direct focus of the Lorenz curve.Step 4: Inflation and deflation refer to changes in the general price level over time, which also are not depicted by the Lorenz curve.Step 5: Income distribution, in contrast, exactly matches what the Lorenz curve is intended to show: who gets how much of the total income.Step 6: Therefore, the correct answer is income distribution.

Verification / Alternative check:
In textbooks on welfare economics and development economics, the Lorenz curve is always introduced in chapters dealing with inequality and distribution. It is often accompanied by diagrams showing the line of perfect equality and the Lorenz curve lying below it. Measures such as the Gini coefficient are calculated from the area between the Lorenz curve and the line of equality. There is no use of the Lorenz curve in standard discussions of employment rates, inflation, or deflation. This confirms that its purpose is to represent income or wealth distribution.

Why Other Options Are Wrong:
Employment (option A) is measured by indicators such as the unemployment rate, labour force participation rate, and employment to population ratio, not by the Lorenz curve. Inflation (option B) and deflation (option C) are tracked by price indices such as the Consumer Price Index or Wholesale Price Index. None of these use the Lorenz curve as a standard tool. Only option D, income distribution, accurately reflects the function of the Lorenz curve.

Common Pitfalls:
Some learners may confuse the Lorenz curve with other economic curves, such as the Phillips curve (which relates inflation and unemployment) or production possibility frontiers. The names and shapes of these curves can be similar, so it is important to remember what variables are plotted on each axis. For the Lorenz curve, always think in terms of cumulative population and cumulative income or wealth, which clearly indicates that it is about distribution and inequality, not about prices or employment directly.

Final Answer:
The Lorenz curve is used to represent Income distribution in an economy.