4.2 Poverty and Inequality

Question 1

What is absolute poverty?

Answer 1

• People who are not able to afford sufficient necessities to maintain life (e.g., food, safe drinking water)

classed as anyone living on less than $1.90 a day

Question 2

What is relative poverty?

Answer 2

• Poverty by comparing different incomes

Relative Poverty = Income of less than 60% of median household income (in the UK)

Question 3

What is the poverty Line?

Answer 3

• The minimum level of income needed to achieve an adequate standard of living

Question 4

What is the poverty trap?

Answer 4

• Little incentive for low income workers to earn extra income (due to taxes, long hours)

Question 5

What is the main cause of poverty?

Answer 5

• Unemployment

Question 6

What are the 2 main causes for relative poverty?

Answer 6

• Wage increase inequality (higher-paid workers get higher pay rises)
• Changes in government spending and taxation

Question 7

What are the 6 reasons relative poverty has grown in the UK?

Answer 7

• Inequalities in wage growth
• Deindustrialisation (increases in the amount of service sector jobs e.g., retail, which pay lower)
• Increased underemployment (e.g., zero-hour contracts, part-time, etc)
• Decline of trade unions (therefore cannot bargain for higher wages)
• Increase in taxes, whilst fall in benefits (regressive)
• Rise in long-term and structural unemployment

Question 8

What is income?

Answer 8

• Flow of earnings

Question 9

What is wealth?

Answer 9

• Stock of assets

(tends to be more inequalities with wealth due to generational wealth)

Question 10

What is the Lorenz curve?

Answer 10

• Curve that shows population against the cumulative percentage of people’s income

Question 11

What is the Gini-Coefficient?

Answer 11

• A measure of income inequality

Question 12

What are the 4 causes of inequality within countries?

Answer 12

• Wages (higher skilled jobs get paid more)
• Wealth level (Easier to gain more wealth if you already have it)
• Chance (luck of inherited wealth)
• Age (older usually means more wealth, but younger may have more income)

Question 13

What are 4 causes of inequalities between countries?

Answer 13

• Wars, Natural Disasters, Developing, and developed countries

(setbacks, and developed countries tend to trade with developed countries)

Question 14

What is the Kuznets hypothesis?

Answer 14

• Inequality falls as the economy grows, and moves from primary to secondary sector

Question 15

What is Piketty’s hypothesis?

Answer 15

• Inequality rises with economics growth (as the rich get richer)

Question 16

What is capitalism?

Answer 16

• Economy with privately owned businesses that operate to make a profit

Question 17

How does a capitalist economy lead to income inequality?

Answer 17

• Wage differentials (e.g., managers get paid more)

Question 18

How does a capitalist economy lead to wealth inequality?

Answer 18

• Individuals own their own resources (e.g., u can have as many houses as you want)

Question 19

What is the argument for inequality?

Answer 19

• Provides incentives for workers to work harder and earn more

Question 20

What is the argument against inequality?

Answer 20

• Excessive inequality can cause inefficiency problems and social injustice (lowering quality of life)