4.1.7 - The distribution of income and wealth : poverty anf inequality

Question 1

What is then difference between income and wealth?

Answer 1

• Income is the amount of money they recieve over a set period of time. E.g Per week.
• Wealth is the value of in money assets held

Question 2

what are some examples of a source of income?

Answer 2

• Wages
• Interest on bank accounts
  -divends from shares and rent from properties

Question 3

What are some examples of sources of wealth?

Answer 3

• Property
• Land
• Money
• Shares

Question 4

What are some of the factors affecting the distribution of income?

Answer 4

-People earn different wages = Certain skills are more in demand than others hence those are more in demand and as a result get paid a lot more .

-Unwaged people - They often rely on state benefots so their incomes are low.

-Tax and state benefits= Those with higher income are taxed more of their earnings over a certain level.Some of this tax is redistributed as benefits to the unemployed or disabled.

• Location= There’s a difference in regions. Highest paid regions were london and southe east while The north east were the two lowest paid.

Question 5

What are some of the factors influencing the distribution of wealth?

Answer 5

• Wealth is more unevenly distributed than income
• Assets increase in value more quickly than income rises.

-In the UK , Income is taxed and wealth is not therefore it’s easier to redistribute income than wealth

-Wealth often earns income- E.g Shares may increase in value and generate more income. Those who earn income from their wealth could invest that income again , which in turn will generate more income . This means wealthiy people get wealthier

Question 6

What does the lorenz curve show?

Answer 6

• Represents the distribution of income

Question 7

What is the GNI coefficent?

Answer 7

• GNI coefficent is a measure of inequality

Question 8

How is GNI calculated?

Answer 8

Gni coefficent = Area A / Area A + Area B

Question 9

What does the GNI coefficent of 0 represent?

Answer 9

• Complete equality ( everyone earns the same)

Question 10

What does the GNI coefficent of 1 represent?

Answer 10

Complete ineuality- One person earns all the income in the country.

Question 11

What is the difference between equality and equity in relaton to the distribution of income?

Answer 11

• Equality means that everyone is treated completely equally.
• Equity is more about fairness- people have different cirumstaces so ts about people getting what they need.

Question 12

Is equality normative or positive?

Answer 12

• Equality is positive

Question 13

Is equity normative or positive?

Answer 13

• Equity is normative

Question 14

What are the two types of equity?

Answer 14

• Horizontal
• Vertical

Question 15

What is horizonral equity?

Answer 15

• People with the same circumsatnces are treated fairly

Question 16

What is vertical equity?

Answer 16

• People with different circumstances are treated fairly

Question 17

What are some of the negatives/ cons of inequality?

Answer 17

• Inheritance
  -Monopolies
• Poverty can be an effect
• Can lead to poverty

Question 18

What are some of the positives/pro’s of inequality?

Answer 18

• Trickle down effect
• Faireness
• Incentives

Question 19

What is excessive inequality a cause an a consequence of?

Answer 19

-MArket failure

Question 20

What also influenecs people’s views of what is considered an equitable distribution of income?

Answer 20

-Value of judgement

Question 21

What is the difference between relative and absolute poverty?

Answer 21

• Relative poverty is when someone has a low income relative to other incomes in their country (e.g people whose income is less than 50% if the average income)
• Absolute poverty is when someone cannot affors th most basic needs eg food shelter, sanitation. The minimumincome needed for thiese basics are called poverty line

Question 22

What are some of the causes of poverty?

Answer 22

• Unemployment
• Low wages
• Natural disasters

Question 23

What can help reduce poverty?

Answer 23

• Education and skills - governments can help introduce more efficent schemes where individuals from abroad can transfer the skills through courses or classes for free through govt investment.
• Reducing discrimination- The governments could help introduce laws and legeslations on reducing racism in the workplace.
  The con - there’s more enforcement costs
• Redistribute taxes- Use the taxes paid from the higher class to the lower paid
• Minimum wage will act as an incentives for individuals to work in the workplace with a higher amount of money being earned