4.2 - absolute and relative poverty, and inequality. Flashcards
distinguish between absolute and relative poverty
absolute poverty is when people are unable to afford the essentials needed in life such as water. relative poverty is where people’s incomes less than 60% of the median household income
identify and explain four policies or factors that could reduce absolute poverty in a country
- Means-tested welfare benefits to the poorest in society; for example, unemployment benefit, food stamps, income support and housing benefit.
- Minimum wages. Regulation of labour markets, for example, statutory minimum wages
- Free market policies to promote economic growth – hoping that rising living standards will filter down to the poorest in society.
- Direct provision of goods/services – subsidised housing, free education and healthcare.
what is the marginal rate of taxation
the amount of additional tax paid for every additional unit of income earned.
what is meant by progressive, regressive and proportional tax?
A progressive tax is based on the taxpayer’s ability to pay. It imposes a lower tax rate on low-income earners than on those with a higher income. This is usually achieved by creating tax brackets that group taxpayers by income ranges. taxes are where the poorest have the burden of most of the tax. a proportional tax is one that imposes the same level of burden on all taxpayers.
identify and explain four factors or policies that could reduce relative poverty in a country
- sustained economic growth
- SS policies to reduce unemployment
- progressive taxes - takes more income from those on higher incomes which means less regressive taxes and increased welfare benefits which increase the income of the poor.
- increasing benefits to the poor
draw the laffer curve
y axis is tax revenue
x axis is tax rate
negative x2 parabola
what does the laffer curve show
show the relationship between tax rates and the amount of tax revenue collected by governments. The curve is used to illustrate the argument that sometimes cutting tax rates can result in increased total tax revenue.
draw the kuznets curve
inequality y axis, incomes x axis
negative x2 parabola
what does the kuznets curve show
it shows that industrialising nations show a rise then a decline in economic inequality. as these nations become more economically developed, the level of inequality decreases as shown in the downward slope in the kuznet curve
distinguish between inequality with a country, and inequalities between countries
inequality within a country refers to wage discrimination, tax systems and so on. inequalities between countries refers to globalisation and how that affects trade and inequality between developed/developing countries.
what is meant by economic development
increase in the standards of livings
how does economic development differ from economic growth
growth refers to increased GDP over time, development refers to increase in standards of living.
name 4 millenium development goals
combat poverty, disease, environmental degradation and discrimination against women
to what extent have the millenium goals been met
some countries have achieved these but others have fallen behind. the countries making the least progress were those affected by high levels of AIDs, HIV, economic hardship or conflict.
what is meant by a less developed country (LDC)
countries with low levels of growth and development including standards of living and GDP.
