Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

microeconomics > 1.7 the distribution of income and wealth: poverty and inequality > Flashcards

1.7 the distribution of income and wealth: poverty and inequality Flashcards

1
Q

absolute poverty

A

when a person doesn’t have enough income to fulfil basic needs

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

distribution of income and wealth

A

the way in which total income and wealth are divided among the population of the economy

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

earnings trap

A

situations where the more an individual earns, the less they are entitled to, making it hard to escape poverty

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

equity

A

fairness, justness

involves value judgements

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

fiscal drag

A

as wages rise, a higher proportion of income is paid in tax

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

gini coefficient

A

measures income or wealth inequality; maximum inequality is 1

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

horizontal equity

A

people in identical circumstances are treated equally

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

hysterisis

A

effects that persist even after the initial causes giving rise to the effects are removed

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

kuznets hypothesis

A

theory that as an economy grows, inequality is initially increased, then decreased

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

lorenz curve

A

can be used to illustrate and measure distributive inequalities

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

means tested benefits

A

entitlement to certain benefits depends on whether the income or wealth of an individual is below a certain level

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

poverty trap

A

where a rise in income leads to a decrease in eligibility in benefits, forcing individuals deeper into poverty

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

vertical equity

A

people in different circumstances are treated unequally, yet fairly

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

real life example of effects of poor education

A

in Madagascar in 1975, the president Ratisaraka decided that he no longer wanted French to be the spoken language in Madagascan classrooms

he wanted Malagasy to be the spoken language instead

he banished all French teachers

‘The Lost Generation’ - students who barely learnt anything

most of the well-paying jobs required French to be spoken

Malagasy speakers had to take extremely low paying jobs

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

consequence of a fall in the standard of education

A

fall in the standard of education

an increase in unemployment

incomes fall

increase in absolute poverty

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

effects of good education

A

increase in skills

increase in productivity

increase in demand for higher salaries

fall in relative poverty

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

effects of education and training

A

increase in productivity

increase in income

decrease in poverty

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

the world bank’s definition of absolute poverty

A

living below the absolute poverty line of $1.90 a day at 2005 GDP measured at purchasing power parity

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

purchasing power parity

A

how much of one currency is needed to purchase a basket of goods compared to another currency

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

in 2013 how many people were estimated to be living in absolute poverty

A

767 million people

over 96% of these people were in developing countries

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

what is relative poverty defined as in the UK?

A

<60% median income in the UK

average income in the UK is £27,000

poverty line is £16,320

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

factors that influence poverty rates

A

economic growth

leadership

deworming children

fighting domestic violence

free school meals

women’s rights

planting trees

mosquito nets

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

example of how infrastructure in India helped reduce poverty

A

improvements in telecommunications in India like new fibreoptic cables and tall cellular radio towers have allowed India’s call centre industry to flourish

hiring more workers

raising income

lifting Indian workers out of poverty

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

possible limitation of providing AID to help reduce poverty with example

A

aid money could go into corrupt politician’s pockets

in 2011 Somalia received $1.3bn in aid

70% of the aid had ‘disappeared’ and went into corrupt politician’s pockets instead

there was little to spend on healthcare and schools, workers couldn’t become more productive

poverty stayed the same

25
Q

example of UK providing foreign aid

A

in 2018 UK donated £374m aid to Pakistan in 2018

spent majority of aid on healthcare and education

better education - better knowledge and skills

better healthcare- increased health, workers can work longer and concentrate more

can command higher salaries as more productive

Pakistan’s GDP rose by over $100

higher salaries lead to a decrease in povertyn

26
Q

negative externalities

A

costs which affect third parties outside the price mechanism

27
Q

social costs

A

private costs + external costs

costs to everyone in society

28
Q

private costs

A

costs to group inside price mechanism

29
Q

external costs

A

costs to group outside price mechanism

30
Q

negative externalities of production

A

SC>PC

goods are being overproduced when there are negative externalities as more is being produced than what benefits society

31
Q

negative externalities of consumption

A

PB>SB

more is being consumed than what is best for society

demand decreases if you take into account social benefits

32
Q

how can the government stop overconsumption or overproduction?

A

by intervening with a tax

could be direct or indirect

33
Q

complete market failure

A

when the market wouldn’t exist without government intervention

only seen in certain public goods

market completely fails to provide a public good at all

34
Q

partial market failure

A

market exists but doesn’t work perfectly

e.g. market for education
some education is provided but too little is consumed

35
Q

7 types of market failure

A

negative and positive externalities

public goods

information gaps

merit and demerit goods

monopoly power

factor immobility

inequitable distribution of income and wealth

36
Q

3 types of market imperfections

A

information gaps

monopoly power

factor immobility

37
Q

merit goods

A

goods that are under-consumed, have positive externalities and information gaps

38
Q

example of a merit good

A

education is under-consumed because of information gaps

don’t have full information about the benefits

individuals who apply for university only consider the private benefits and ignore all social benefits such as an increase in tax revenue for the government

39
Q

demerit goods

A

goods that are overconsumed, have negative externalities and information gaps

40
Q

example of a demerit good

A

cigarettes

passive smoking can lead to lung cancer
younger consumers aren’t informed of full health costs

41
Q

value judgements

A

an evaluative statement of how good or bad you think an idea or action is

42
Q

how could alcohol be deemed as having positive externalities?

A

e.g. a sober person having more fun at a party because other people are drunk

they are outside the price mechanism

43
Q

imperfect information

A

consumers or producers lack information needed to make an informed decision

more information closes the information gap

44
Q

types of imperfect information

A

incomplete information

asymmetric information

45
Q

incomplete information

A

when someone doesn’t have full information about the benefits or costs of their decisions

e.g. 7 year old child can’t see long run benefit of education
40% of young adults without GCSE’s are unemployed

46
Q

asymmetric information

A

when one party knows more than another party in a transaction

e.g. buying a phone on ebay, could get ripped off and waste money

47
Q

how can the government solve underconsumption?

A

regulation
e.g. legally requiring students to stay in education till age 18

information provision
providing info on the benefits of education

subsidies
subsidising tuition fees
supply increases, price decreases

48
Q

how can the government solve overconsumption?

A

regulation e.g. legally banning public smoking

information provision e.g. adverts on the costs of smoking

indirect taxes e.g. specific taxes of cigarettes, increases price and decreases quantity demanded

49
Q

how taxation can reduce negative consumption externalities

A

can be solved through an indirect tax

paying indirect tax would increase costs for producers because they’d have to pay an extra tax to the government on top of all their other production costs

producers will respond with an inward shift of the supply curve as they are willing to supply less for the same price

50
Q

how can minimum prices reduce overconsumption

A

min price introduced

prices are higher

QD is lower

overconsumption is reduced

51
Q

disadvantage of minimum prices

A

only works if price is set above equilibrium price otherwise overconsumption won’t decrease

52
Q

social benefit

A

external benefits + private benefits

53
Q

market failure

A

when price mechanism leads to a misallocation of resources

54
Q

geographical immobility

A

barriers faced by people moving from one area to another to find work

worker will stay unemployed which is a market failure

55
Q

occupational immobility

A

lack necessary skills to have job

56
Q

what does occupation immobility lead to?

A

structural unemployment

57
Q

why do labour markets fail?

A

factor immobility

58
Q

how can the government fix occupation immobility?

A

education

training

apprenticeship schemes

59
Q

how can the government intervene to fix geographical immobolity?

A

improving transport e.g. HS2

relocation subsidies to help cover the costs of moving

microeconomics (8 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions