4.2 Poverty and Inequality

Question 1

What is absolute poverty?

Answer 1

The inability to afford sufficient necessities for basic human needs e.g food, water

Question 2

What is relative poverty?

Answer 2

The income of people/households compared to the median income (those who cannot afford goods/services considered ‘normal’)

Question 3

What is classed as relative poverty in the UK?

Answer 3

An income of less than 60% of the median household income

Question 4

What Is the difference between wealth and income?

Answer 4

• Income: the flow of money a person/household receives in a particular time period e.g wages, salary
• Wealth: the stock of asset which that a person/household owns at a
  particular point in time e.g houses, pensions, savings

Question 5

What are the 2 measures of income inequality?

Answer 5

• Lorenz curve
• Gini coefficient

Question 6

What does the Lorenz curve show?

Answer 6

• The cumulative % of the population plotted against the cumulative % of income
• Line of perfect income equality which

Question 7

What does the Gini coefficient measure and what does the value mean?

Answer 7

• The extent to which the distribution of wealth/income within an economy deviates from a perfectly equal distribution
• The higher the value, the less equal the distribution

Question 8

Why is wealth more unequally distributed than income?

Answer 8

• Those who are wealthy generate an income from their assets
• As long as income exceeds expenditure,
  they can build up a stock of assets
• This accumulation of wealth can occur
  over generations through inheritance

Question 9

What is the distribution of income?

Answer 9

How wealth is divided between different groups in society e.g on a regional, age, gender basis

Question 10

How is the Gini coefficient calculated?

Answer 10

Area between diagonal and Lorenz curve/Entire area under diagonal

(A/A+B)

Question 11

What are 3 causes of wealth/income inequality within countries?

Question 12

What is a cause of wealth/income inequality between countries?

Question 13

What are 3 causes of a growth in relative poverty?

Question 14

What are 3 causes of relative poverty?

Answer 14

• Rise in long-term unemployment: welfare benefits often lower than income earned, rise in unemployment=rise in relative poverty
• Inequality in wage growth: highest paid
  job wages increase higher than lower wages
• De-industrialisation: increased service sector jobs which tend to be lower paid (structural unemployment)

Question 15

What is the relationship between absolute poverty and GDP?

Answer 15

Absolute poverty tends to fall as GDP increases (government provides support/benefits to less fortunate)

Question 16

What is the poverty trap?

Question 17

What is the poverty cycle?