Measurement of Inequality:

Income distribution can be studied by analyzing functional income distribution and the personal income distribution. Functional .distribution of income tells us the distribution of income amongst factors of production while personal income distribution refers to the level of income distribution amongst individuals or households. The level of per capita income and the rate of change of personal incomes provide indications about the level of income inequality in an economy.

Similarly, the average personal  income level provides a crude indication of average welfare, while the level and range of per capita income provides equally crude indication of speed and direction of change in that welfare. There are different measurements to study income inequalities in an economic system. Two of the commonly used measurements are Lorenz Curve and Gini Coefficient.