What measures income inequality by comparing the area between a Lorenz curve and the line of absolute equality?

The Gini coefficient is a statistical measure that quantifies income inequality within a population by assessing the distribution of income or wealth. It calculates the area between the Lorenz curve, which represents the actual distribution of income, and the line of absolute equality, where each individual would earn the same amount.

When the Gini coefficient is close to zero, it indicates that income is distributed more equally among the population. Conversely, a Gini coefficient close to one suggests a high level of inequality, where a small portion of the population controls a large share of total income. This measure provides valuable insights into economic disparities and is widely used in socio-economic studies to analyze inequality trends over time or between different regions or countries.

In contrast to this, the Laffer curve illustrates the relationship between tax rates and tax revenue, and the Lorenz curve itself is a graphical representation of income distribution rather than a specific measure. A tariff relates to trade policy, imposing taxes on imported goods, and does not pertain to measuring income inequality. Thus, the Gini coefficient is the most appropriate answer for measuring income inequality through the relationship between the Lorenz curve and the line of absolute equality.