3.4.1 - Economics of Inequality and Poverty Flashcards
Define equity
Equity in Economics is about fairness in terms of everyone in society having an equal opportunity to achieve an economic outcome.
Define equality
The way the economic outcomes for different people in society are the same.
Define the Lorenz curve
A graph that shows the income distribution of a country.
Define the Gini Coefficient
The Gini coefficient can be used to measure the size of a country’s income inequality.
area A / (area A + area B)
Lies between 0 and 1
higher = more inequality
Define poverty
Poverty is where households in a country lack the income needed to achieve a basic standard of living.
Define absolute poverty
Absolute poverty exists when household income is below the level needed to meet a person’s basic needs of life.
Define relative poverty
Relative poverty is where a household’s income is significantly below a country’s average income.
Define poverty line
A poverty line is the minimum level of income needed for a basic standard of living in a country.
Define multidimensional poverty index
The Multidimensional Poverty Index (MPI) uses a number of weighted criteria to measure poverty in a country based on a survey of households.
List 6 problems of measuring poverty
- Survey; sampling error
- There are different methods used to define poverty
- Some aspects such as anxiety are difficult to measure
- Lines of absolute and relative poverty are difficult to apply
- Can be manipulated by government for political reasons
- Weighted index used by the MPI is difficult to apply and calculate.
List the 7 causes of poverty
- Inequality of opportunity
- Resource ownership
- Human capital
- Discrimination
- Status and power
- Government policies
-Globalisation
List 3 impacts of wealth inequality
- Social stability
- Economic growth - less productive workers and less spending
- Standards of living
