4.2.2 Inequality

Question 1

What is ‘wealth’?

Answer 1

Defined as a stock of assets such as a house, shares, land and cars

Question 2

What is ‘income’?

Answer 2

Money received on a regular basis. This could be for a job, welfare payments e.c.t.

Question 3

What are the two ways in which we measure inequality?

Answer 3

• the Lorenz curve

- Gini coefficient

Question 4

What is the Lorenz curve?

Answer 4

A way of showing the distribution of income or wealth within a country. It shows the cumulative shares of income from different sections of the population

Question 5

On the Lorenz curve, what does the straight line represent?

Answer 5

Perfect Equality

Question 6

On the Lorenz curve, analyse it?

Answer 6

Shows a significant level of inequality.
50% of the Households own 15% of the wealth
In other words…
The richest 50% of Households own 85% of the welath

Question 7

A shift outwards in the Lorenz curve shows what?

Answer 7

Increasing inequality

Question 8

What is the Gini Coefficient?

Answer 8

A numerical value for inequality

Question 9

How is the Gini Coefficient calculated?

Answer 9

Area A / Area A + Area B

Question 10

On the Lorenz curve, how is the Gini Coefficient calculated?

Answer 10

A / A + B

Question 11

What does a value of 0 show within the Gini Coefficient?

Answer 11

Perfect equality

Question 12

What does a value of 1 show within the Gini Coefficient?

Answer 12

Perfect inequality, i.e. all the wealth in the country is concentrated in the hands on 1 individual / household

Question 13

What are the causes of income and wealth inequality between countries?

Answer 13

• inequality in wages
• welfare payments and taxes
• unemployment

Question 14

How does inequality in wages affect wealth and income inequality between countries?

Answer 14

More part time and temporary jobs have been made available leaving people underemployed which limits earning potential
Those with a degree earn more than those without
Men earn more than women

Question 15

How do welfare payments and taxes affect wealth and income inequality between countries?

Answer 15

State pensions and welfare payments tend to increase less than what wages do.
Welfare payments can be cut
VAT is regressive

Question 16

How does unemployment affect wealth and income inequality between countries?

Answer 16

Structural = decline of industry 
Cyclical = loss of demand

Question 17

What causes inequality between countries?

Answer 17

External factors such as wars, famines, droughts e.c.t.
Population changes, Africas population of 1.1billion is meant to double by 2050 complicating efforts to reduce hunger
Exclusion of race, genders, sexual orientation e.c.t

Question 18

What did Kuznet propose?

Answer 18

That as a society develops and moves from an agricultural one to a more industrial one, inequality rises. But this is only a tranistionary phase as wealth is then distributed via the government and this, in turn, reduces inequality

Question 19

How does capitalism affect inequality?

Answer 19

Capitalism is when capital is privately owned, and wages are passed down via private firms. In a capitalist society, entrepreneurs take risks and are driven by the profit motive, therefore inequality is essential. It motivates workers to achieve more which encourages the learning of more skills and hard work.

Question 20

How does inheritance lead to inequality?

Answer 20

Those with the most wealth pass it down to younger generations, they can achieve a higher education than those with no money can’t. They therefore get the better jobs, earn the most money e.c.t