Which measure indicates the degree of income inequality on a scale from 0 to 1?

• A. Lorenz Curve
• B. Private Cost
• C. Gini Coefficient
• D. Social Benefit

Answer: (C)

The key idea is turning the distribution of income into a single number that measures how uneven it is. The Gini coefficient does exactly that. It comes from the Lorenz curve, which graphically shows the proportion of total income earned by the bottom x% of people. The Gini coefficient is the area between that curve and the line of perfect equality, divided by the total area under the line of equality. This yields a value between 0 and 1: 0 means everyone has the same income (perfect equality), and 1 would mean all income goes to one person (maximal inequality). In practice, real distributions fall somewhere in between. The other options aren’t numeric measures of inequality—the Lorenz curve is a graph, private cost is about individual production costs, and social benefit is about total societal benefits rather than the distribution of income.