The distribution of income and wealth: poverty and inequality

Question 1

Factors affecting distribution of income

Answer 1

Different wages

unwaged people-state benefits

Taxes-Progressive taxes

Question 2

Lorenz curve

Answer 2

Distribution of wealth graphically

Question 3

What does lorenz curve look like

Answer 3

Horizontal axis-culmative percentage of population

vertical axis-culmative percentage of income

diagonal line is complete equality

Question 4

Gni coefficient

Answer 4

The measure of inequality on a lorenz curve

Question 5

Gni coefficient equation

Answer 5

Area a divided by area a + Area B

Coefficient of 0 is complete equality

Question 6

Equality

Answer 6

Everyone is treated equally

Question 7

Equity

Answer 7

is about fairness people have different have different circumstances and needs

Question 8

Normative statement

Answer 8

based on opinion

Question 9

Horizontal equity

Answer 9

People with the same circumstance treated fairly for example all people are taxed the same

Question 10

Vertical equity

Answer 10

people with different circumstance treated fairly for example people with higher income taxed more

Question 11

Advantages of unequal distribution of income

Answer 11

Gives people incentive to work hard

it encourages people to work

encourages trickle down effect if theres inequality and economic growth the rich could give to the poor

Question 12

Relative poverty

Answer 12

when someone has income relative to the rest of the population

Question 13

absolute poverty

Answer 13

when you cant afford the basics like food and shelter

Question 14

causes of poverty

Answer 14

unemployment-the unemployed will likely have bottom level income

wages-workers likely to recieve low wages

Question 15

Effects of poverty

Answer 15

poverty trap-when people are relying on state benefits or on low wages which could be depleted by tax

Question 16

Government policies to alievate poverty

Answer 16

benefits,state provision,progressive tax,economic growth, national minimum wage

Question 17

Benefits- Government policies to alievate poverty

Answer 17

help to redistribute income through tax revenue

costs-could contribute to poverty trap

Question 18

State provision-Government policies to alievate poverty

Answer 18

bringing free education and health to reduce inequality gap

costs- free access could be expensive and reduces incentive to work and also increases tax

Question 19

Progressive tax-Government policies to alievate poverty

Answer 19

Bigger percentage of tax taken from people with higher incomes than those with lower income, help to reduce the difference in income

costs- Progressive tax contributing to poverty trap, loss of labour and money caused by consumers moving country due to high tax

Question 20

Economic growth-Government policies to alievate poverty

Answer 20

jobs are created and unemployment reduced, higher wages

costs- economic growth hard to achieve, result in large inequalties through the rich getting richer, more poverty and inequality

Question 21

National minimum wage-Government policies to alievate poverty

Answer 21

reducing poverty among lowest paid workers, help bring a reasonable standard of living

costs-firms may employ fewer people rise in unemployment