In the study of income distribution, a Lorenz curve is a graphical representation that shows which of the following aspects of an economy?

Introduction / Context:
The Lorenz curve is a widely used tool in economics to illustrate how income or wealth is distributed within a population. It is closely linked to the Gini coefficient, which provides a numerical measure of inequality. Many objective questions ask you to recall what exactly the Lorenz curve represents. This question focuses on identifying that key idea.

Given Data / Assumptions:
- The Lorenz curve is a diagram usually drawn with cumulative population share on the horizontal axis and cumulative income or wealth share on the vertical axis.
- Several possible interpretations are offered: inflation, unemployment, income distribution and poverty.
- We assume standard usage of the Lorenz curve in welfare economics and statistics.

Concept / Approach:
A Lorenz curve plots the cumulative percentage of total income (or wealth) received by cumulative percentages of the population, ranked from poorest to richest. The closer the curve is to the 45 degree line of perfect equality, the more equal the distribution; the more bowed out the curve is, the greater the inequality. It does not depict inflation, unemployment rates or poverty lines directly; those are different economic indicators.

Step-by-Step Solution:
Step 1: Identify the key feature of the Lorenz curve: it orders the population by income or wealth and then shows how total income is shared among them.Step 2: Examine option C: the distribution of income or wealth among the population. This matches the definition because the curve directly visualises what share of total income accrues to different segments of the population.Step 3: Examine option A: inflation. Inflation refers to the general rise in prices; it is tracked by price indices, not by Lorenz curves.Step 4: Examine option B: unemployment. Unemployment is measured by unemployment rates, labour force surveys and related statistics, not by Lorenz curves.Step 5: Examine option D: poverty. While Lorenz curves are related to inequality and poverty analysis, they do not directly show the number of people below the poverty line; they show the shape of the distribution.

Verification / Alternative check:
You can verify by recalling how policymakers use the Lorenz curve. By comparing Lorenz curves for different years or countries, they can visually assess whether inequality is rising or falling. The curve is often accompanied by the Gini coefficient, which is calculated as twice the area between the line of perfect equality and the Lorenz curve. None of this analysis deals directly with inflation or unemployment; it is about how income or wealth is shared.

Why Other Options Are Wrong:
Option A is wrong because inflation is about price levels, not distribution of income. Option B is wrong because unemployment concerns the number of people without jobs, which is described by different statistics. Option D is wrong because poverty is usually measured by counting people below a poverty line; although inequality and poverty are related, the Lorenz curve is not a poverty headcount diagram.

Common Pitfalls:
Students sometimes loosely associate the Lorenz curve with poverty because both relate to social issues. However, inequality and poverty are distinct concepts: high inequality can exist with low poverty and vice versa. Remembering that the Lorenz curve is specifically about distribution—who gets how much of total income—helps to keep the concept clear.

Final Answer:
The Lorenz curve shows The distribution of income or wealth among the population.