absolute and relative poverty

Question 1

what is one of the biggest criticisms of the free labour market?

Answer 1

one of the biggest criticisms of the free labour market is that the end result could be significant income inequality and poverty

some may argue these are sources of labour market failure

Question 2

name the two types of poverty?

Answer 2

absolute
relative

Question 3

what is absolute poverty?

Answer 3

incomes below a threshold to access the most basic, life sustaining goods and services

Question 4

what is relative poverty?

Answer 4

incomes below a given average in society

Question 5

what is equity?

Answer 5

fairness in the distribution of income

Question 6

what is equality?

Answer 6

equal distribution of income

Question 7

what is horizontal equity?

Answer 7

• equal treatment of equals
  
  • those with the same incomes are taxed the same

Question 8

what is vertical equity?

Answer 8

• higher income earners are taxed more
  
  • progressive/ proportionate taxes

Question 9

recall the causes of poverty?

Answer 9

unemployment
poor education/skills
poor healthcare
wage differentials
tax cut for the well off
subsistence agriculture
being born into poverty or raised by a single parent

Question 10

how does unemployment cause poverty?

Answer 10

• cyclical or structural
  
  • during a recession when there is a lack of AD in an economy workers may lose their jobs
  • workers may not have transferrable skills if there are changes in the jobs available in an economy so they may not be able to access other jobs in the economy
  • if theres no training of these workers so that they can take the jobs that are available in society, they may be unemployed for a long period of time
    
    • hysteresis argument
    • they may get stuck in poverty

Question 11

how can poor education and healthcare cause poverty?

Answer 11

• can limit productivity and earning potential
• limit the type of jobs people can work

Question 12

how can wage differentials cause poverty?

Answer 12

the bigger the wage differentials between the high pay and low pay professions the greater the relative poverty is likely to be

Question 13

how does tax cuts for the well of cause poverty?

Answer 13

• those that are earning high incomes get an automatic benefit to their incomes
• increase the divide between the rich and the poor

Question 14

how does subsistence agriculture cause poverty?

Answer 14

• developing countries
• culture of raising children to work on farms to keep subsistent agriculture growing instead of sending them off to get an education which could increase productivity
• leads to poverty