Poverty and Inequality

Question 1

Absolute Poverty

Answer 1

When someone can’t afford basic necessities, minimum income needed is the poverty line

Question 2

what is the poverty line income

Answer 2

1.90 USD per day

Question 3

Relative poverty

Answer 3

low income relative to others in the country, 50% less than the average income

Question 4

Poverty trap

Answer 4

when those in poverty earn higher wages they pay more tax and receive less benefits so their wage increase isn’t beneficial and sometimes is even disadvantageous

Question 5

Causes of changes in absolute and relative poverty

Answer 5

• increase income inequality can increase relative poverty
• Growth can reduce poverty
• rapid pop growth can lead to absolute poverty
• progressive taxation helps with relative poverty
• social welfare and benefit programs
• foreign aid can help to reduce poverty

Question 6

causes of poverty

Answer 6

• unemployment
• low wages
• low state benefits
• personal debt
• poor education

Question 7

Government policies to reduce poverty levels

Answer 7

• Benefits can redistribute income
• state provision of healthcare or education
• progressive taxation helps with vertical equity
• economic growth can create more jobs and higher wages
• NMW reduce poverty among lowest paid workers and create incentive to work

Question 8

income inequality

Answer 8

inequality in the amount of income received

Question 9

wealth inequality

Answer 9

inequality in the value of assets

Question 10

causes of wealth and income inequality within countries

Answer 10

• people earn different wages
• Those with already high levels of wealth may only increase
• older people will have higher incomes and more wealth
• chance in buying the right asset

Question 11

why is wealth more unevenly distributed than income

Answer 11

assets aren’t taxed and can’t be redistributed, and wealth can increase in value and generate more wealth like a share increasing in value

Question 12

causes of wealth and income inequality between countries

Answer 12

All countries are different levels of developed and some have been impacted more by wars and famines that impact wealth

Question 13

Kuznet hypothesis

Answer 13

As society industrialises inequality increases as industrial workers wages rise faster than farmers and then income can be redistributed by the gov

Question 14

How did pikkety disagree with kuznet

Answer 14

inequality continues to rise with industrialisation as the rich only get richer

Question 15

How is capitalism significant in worsening inequality

Answer 15

• wages vary greatly from job to job
• ## Individual ownership of resources so people have more personal wealth

Question 16

What is the relationship between inequality and capitalism

Answer 16

Inequality is necessary for capitalism to function as the prospect of higher wages or more wealth creates harder work or entrepreneurship and innovation

Question 17

what is the x and y axis for the Lorenz curve

Answer 17

X axis - cumulative percentage of the population
Y axis - cumulative percentage of income

Question 18

What does the diagonal line on the Lorenz curve show

Answer 18

complete equality so 20% of the population would have 20% of the income

Question 19

How does the Lorenz curve show greater inequality

Answer 19

the further away it curves from the diagonal as it shows larger % of pop holding a smaller % of income in the country

Question 20

Gini coefficient formula

Answer 20

area A / area A + area B

Question 21

What is area a and b on the Lorenz curve

Answer 21

area A - between the curve and the diagonal
area B - between the curve and the corner of the graph

Question 22

what does mini coefficient of 1 and 0 represent

Answer 22

0 = complete equality
1 = complete inequality

Question 23

gini coeffecient in UK in 1979 and 2019

Answer 23

0.27 and 0.33