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Income inequality in an economy refers to the unequal distribution of income among individuals, households, or groups within a society. Measuring income inequality is a critical aspect of understanding economic disparities, and it serves as a basis for designing policies to address poverty and social welfare. Several methods are employed to measure income inequalities, each providing insights into different dimensions of disparity. One of the most commonly used measures is the Gini coefficient, which quantifies the degree of inequality in a distribution of income. A Gini coefficient of 0 represents perfect equality, where every individual earns the same income, whereas a coefficient of 1 indicates maximum inequality, where all income is concentrated in the hands of a single individual. This measure is widely used in policy analysis because it provides a single numerical value that can be tracked over time to assess changes in inequality. Another widely employed method is the Lorenz curve, which visually represents income distribution. On the Lorenz curve, the cumulative percentage of total income earned is plotted against the cumulative percentage of population, starting from the poorest to the richest. The further the Lorenz curve is from the line of equality, the greater the income inequality. This visual representation complements the Gini coefficient and helps policymakers understand the extent to which income is concentrated among particular segments of the population. Additionally, income quintile or decile analysis is used, where the population is divided into five or ten groups based _________ ___ _______ _________ _______.
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