4.2.1 - 4.2.2 Poverty And Inequality Flashcards
What is absolute poverty
The inability to purchase the basic necessities of life including food, water, shelter, education, clothing and sanitation
What is relative poverty
Income and wealth is measured in comparison to the average in a country
What is the UK’s measure of relative poverty
People with less than 60% of median income
What is income
A flow of money paid to the factors of production
What is wealth
A stock of assets
What are the axis labelled as on the Lorenz curve
Y axis - cumulative % of income
X axis - cumulative % of population
What is the gini coefficient
A measure of income distribution in a population
What is the formula for the gini coefficient
A / A+B
What is the gini coefficient in perfect equality
0
What are some causes of inequality
-education
-investment
-wage differences
-housing
What are some causes of wealth inequality
-rising asset prices e.g house prices have risen faster than the rate of inflation
-pension inequality and ability to save - higher earners can save more
What are some policies to reduce inequality
-tax and benefits
-increases in minimum wage
-subsidised housing
-scholarships
Reasons why inequality is necessary in a capital economy and example
-incentives hard work
-increases productivity
-increases real GDP
-trickle down effect (they rich create jobs for others through their spending)
E.g USA has Gini coefficient of 0.36 but has a strong innovative economy
Reasons why inequality is not necessary in a capitalist economy
-government policies can be used to reduce inequality
-high taxation can be used to provide high quality education and free childcare
-increased productivity
-increased real GDP
E.g Sweden has gini coefficient of 0.22 and is a very strong economy with many successful firms such as IKEA, Volvo and H&M
