Poverty and inequality

Question 1

what is absolute poverty ?

Answer 1

Individuals lack the resources to meet basic survival needs (necessities) such as food water sanitation health shelter and education to survive.

Question 2

what is relative poverty ?

Answer 2

poverty relative to the standards of living within a specific country. for example if they earn less than 50% of the median income.

Question 3

what is inequality?

Answer 3

the uneven distribution of income across a population. It measures disparities in how income is shared within individuals or households in an economy

Question 4

what is the Gini Coefficient ?

Answer 4

a statistical measure of inequality within a population, ranging from 0 (perfect equality) to 1 (maximum inequality). The Gini index is the gini coefficient x 100

Question 5

what is Lorenz curve ?

Answer 5

a graphical representation of the degree of income or wealth inequality in a society. There is a straight 45 degree line (perfect equality), the farther the second line (Lorenz curve) is away from the stright one the greater the degree of inequality.

Question 6

causes of income inequality

Answer 6

• policy changes e.g. decreased tax on rich and less benefits
• globalisation e.g. demand increases for more skilled workers and so skilled workers wages increase
• technology increases which requires skilled workers = increased competition for low skilled workers
• decline of trade unions

Question 7

possible solutions for income inequality

Answer 7

• increase minimum wage / trade unions
• increased education by expanding schools and universities
• redistributive policies (more benefits and increased tax on the rich)

Question 8

what is kuznets curve ?

Answer 8

suggested relationship between economic development and inequality. Kuznets argued that as a country develops and its GDP grows during industrialisation it results in increased inequality as workers move from lower productivity and lower paid agricultural sector into the higher productivity manufacturing sector. However at some point inequality starts to decrease because the government have more resources to redistribute income through the tax and benefit system. Almost a rainbowed shaped diagram with inequality of the y axis and GNI per capita on the x axis.