poverty and inequality

Question 1

absolute poverty definition

Answer 1

Absolute poverty is when household income is below a certain level, which makes it impossible for the person or family to meet basic needs of life including food, shelter, safe drinking water, education, healthcare, etc.

Question 2

relative poverty definition

Answer 2

Relative poverty is when households receive 50% less than average household incomes, so they do have some money but still not enough money to afford anything above the basics.

Question 3

3 factors affecting the distribution of income

Answer 3

people earn different wages from different jobs

unemployed people rely on benefits

progressive tax - redistributed e.g. as benefits

Question 4

name of curve which shows the extent of inequality

Answer 4

lorenz curves

Question 5

other measure of inequality

Answer 5

gini coefficient

Question 6

how can gini coefficient be calculated from lorenz curve

Answer 6

area under diagonal and over curve / both areas added

Question 7

gini coefficient scale

Answer 7

0 = complete equality
1 = complete inequality

Question 8

positives of inequality

Answer 8

provides incentives to work harder and earn more
encourages enterprise
encourages work instead of benefits
may create trickle down effect

Question 9

negatives of inequality

Answer 9

poverty
restricts growth for talented people who are poor
higher crime rates

Question 10

causes of poverty

Answer 10

unemployment

low wages - usually workers with low skills

Question 11

what is the poverty trap

Answer 11

people relying on benefits begin to earn higher wages but then benefits are reduced and more tax payed so disposable income may drop
this may disincentivise people to work harder

Question 12

5 ways government intervenes to reduce poverty

Answer 12

benefits
state provision
progressive taxation
economic growth boosting
minimum wage