2.4 Economics of inequality and poverty Flashcards
What is the difference between equality and equity
equality = fairness equality = everybody recieves the same
Why does disparity occur
income of households standard of education healthcare and nutrition child labour Discrimination resource ownership
What is the difference between relative and absolute poverty
Absolute poverty - no access to basic resources around 1.2 billion people world wide
relative poverty - less than 50% of median income, cannot buy everything they want
Ways of measuring inequality
Lorenz curve and Gini coefficient
how to measure the Gini index coefficient
area of a/ area of a + area of b
1 = perfect inequality 0 = perfect equality
What are different types of taxes
direct taxes indirect taxes proporitonate taxes regressive taxes Progressive taxes
What is a direct tax
a tax on income
What is an indirect tax
a tax on expenditure
What is a progressive tax
higher income earners pay a higher proportion in taxes
What is a regressive tax
lower income earners pay a higher proportion in taxes Indirect taxes are regressive
What are proportionate taxes
As income rises, earners pay a proportionately higher rate of tax
Ways to distribute income other than by taxes
transfer payments
minimum wages
improve opportunities for the disadvantages
government spending on essential goods and services
however
they produce extra costs for firms
higher taxes
government spending
Ways to distribute income other than by taxes
transfer payments
minimum wages
improve opportunities for the disadvantages
government spending on essential goods and services
however
they produce extra costs for firms
higher taxes
government spending
What is economic growth
an increase in real GDP over time
What are positive consequences of economic growth
better living standards
higher government revenue
what are the disadvantages of economic growth
pollution and hapiness
1a. Using an appropriate diagram, explain how an increase in investment may result in economic growth (10 marks)
essay
b. Discuss the possible consequences of economic growth (15 marks)
essaay
What are costs of unemployment
reduced standards of living costs to society - crime, suicides loss of output loss of income tax extra spending on benefits less revenue for businesses
What are types of unemployment
Rea wage cyclical frictional seasonal structural equilibrium
Diagram equilibrium unemployment
Labour market is in equilibrium ADL
ASL
(aggregate demand of labour or supply of labour)
At We, Qe are prepared to take hobs but a to b are unemployed,
skill mismatch
gap narrows as wages rise
Average real wage rate versus number of workers
labour force is greater than the ASL
What is crowding out
when the government borrows money to spend on supply side policies to reduce unemployment
Borrows through governments bonds
Interest rates are increased
Demand increases for bonds d1 to d2
investments decreases from firms
unemployment increasdes
