Poverty Flashcards
What is absolute poverty?
When people are unable to afford sufficient necessities to sustain life
What is relative poverty?
This compares people’s relative incomes between a given area
What is the poverty trap?
High benefits
Deincentivises lower income workers from looking for jobs
Workers will get less money working
So they decide not to work
What can cause poverty?
Unemployment
Lack of skills
Health problems and income dependency
What is income?
A flow of earnings
What is wealth?
A stock of assets
What are assets provide examples?
Things that can generate income (stocks, shares)
Why is there wealth inequality?
Assets get built up over time
They are passed down through generations
People are able to build up their assets as they build up their incomes over time
What does the Lorenz curve show?
The percentage of people compared to the percentage of income that they earn
It shows us who fits into each individual income bracket
How can wages lead to inequalities within a country?
Some workers earn more than others
This may be due to better education, more hours worked etc
How can wealth levels affect inequalities within a country?
If people have high levels of wealth, they are generating income from their assets this means those without wealth they won’t have this excess income
How can chance and luck affect income inequality?
Some times people buy assets at the right time or in the right place, which causes them to appreciate in value
How can age influence income inequality?
Older workers will be more likely to build up asset portfolios
What is the Kuznets hypothesis?
Society moves from agriculture into industry
Inequality increases as a result
Wages rise for industrial workers fast
This is corrected by tax and gvt spending
What is Pikets inequality theory?
Increased economic development
More return on capital gains
Rich get richer and inequality rises as a result
