Pareto Distribution

The Pareto Distribution is a continuous probability distribution used in the fields of economics, statistical process control and other areas. It is often referred to as the “80/20 Rule” because of its typical application in which 20% of the population or items account for 80% of the event occurrences. This distribution is used to describe the distribution of wealth, concentration of political power, the number of hits on a website, and other phenomena. In terms of economic behavior, the Pareto Distribution is often used to explain the concentration of wealth among the population, as 20% of the population usually holds 80% of the wealth. Using the Pareto Distribution helps us to better understand the relationship between the population and their respective wealth concentrations.