Lesson 42-Inequality Flashcards
What does income consist of?
Income consists of the returns that households receive as a result of providing their factors of production
What does wealth consist of?
It is a measure of household assets
Why are inequality of wealth and income often quite closely correlated?
This is because earning a higher income allows households to buy more assets
What does a gini index of 0 and 100 represent?
A gini index of 0 represents perfect equality, while an index of 100 implies perfect inequality
What is the Lorenz curve used to plot?
It is used to plot the cumulative share of income or wealth against the cumulative share of the population
What does a line further away from the Lorenz curve represent?
The further away from the Lorenz curve, the greater the degree of inequality
Give 3 main causes of inequalities within countries?
1.Big differences in wages and earnings in different jobs/occupations
2.Minimum educational qualifications
3.Varying scale of trade union representation
4.Changing skill requirements of different jobs
5.The effects of unemployment
6.Damaging effects of poor health and nutrition on employment opportunities
7.Changes in the taxation of income and wealth
What is the trend in gap per capita income between countries?
The gap has been closing over the last two decades as a result of Globalisation and the raising of emerging economies economic growth rate
Give three of the main causes of inequality between countries
1.Low life expectancy and fewer years of healthy life expectancy
2.Low school enrolment rates as families cannot afford education
3.Low access to basic health care and poor nutrition
4.Limited access to families in debts
5.Much lower productivity leads to lower wages
6.Low real spending power limits the size of domestic markets for goods and services
7.Low prices for primary commodities-smallholder farmers have no bargaining power
What is the hollowing out effect which globalisation in advanced countries led to?
This means that there are more jobs in relatively unskilled work offering low rates of pay, fewer jobs in traditional full time industry and more jobs in high knowledge occupations
What does the Kuznet curve suggest?
This suggests that inequality often rises during a phase of rapid industrialisation and urbanisation
What tipping point does the Kuznets curve infer?
It suggests that there may come a point when increased welfare provision, progressive taxes and more balanced income growth across industries might lead to a fall in overall inequality at higher per capita incomes
Give two of the main pillars of a free market capitalist economic system
1.Private property-people own tangible assets
2.Self interest
3.Competition in Markets
4.The price mechanism
5.Freedom of Choice
6.Limited role of government
What can be used to help curb monopoly profits?
Competition policy and intervention by industry regulators can help control monopoly profits
How can the govt tax high profits?
Through a progressive tax system
