3. Income and Wealth: Poverty and Inequality - Poverty, Causes & Types

Question 1

What are the two types of poverty?

Answer 1

Absolute povertyRelative poverty

Question 2

What is absolute poverty?

Answer 2

% of incomes below a certain threshold to access the most basic, life sustaining goods & services

Question 3

What is relative poverty?

Answer 3

% of incomes below a given average in society

Question 4

What is the difference between equity and equality?

Answer 4

Equity = the fair distribution of incomeEquality = an equal distribution of income

Question 5

What is horizontal equity?

Answer 5

The equal treatment of equals - if two people earned the same income they’d be taxed the same amount

Question 6

What is vertical equity?

Answer 6

Those who earn higher incomes are taxed more than those on lower incomes - progressive tax systems

Question 7

What are the causes of poverty? (1)

Answer 7

1. Unemployment - cyclical or structural, which is worse as it can be l-term2. Poor education & skills - less transferable skills, less earning potential3. Poor health/healthcare - illness prevents people working - lose jobs 4. Wage differentials - diff. ppl earn diff. wages - will create relative poverty for some

Question 8

What are the causes of poverty? (2)

Answer 8

1. Born into poverty - stats suggest those with poorer parents go on to earn less themselves2. Tax cuts for well off - will drive up average incomes - increase relative poverty3. Subsistance agriculture - in developing countries children raised to work on farms - restricts earning potentials and skills