Theme 4.2 - Poverty and inequality

Question 1

4.2.2 - What is the distinction between wealth and income inequality?

Answer 1

Income inequality is the gap between the rich and poor in society/how unevenly income is distributed over a population/extent to which income is distributed in an uneven manner

Wealth inequality is how unevenly assets are distributed over a population/the extent to which wealth is distributed in an uneven manner

Income (flow concept)
Wealth (stock of assets)

Question 2

4.2.2 - What are the causes of income and wealth inequality within countries and between countires?

Answer 2

Within:
- Wages, Wealth levels, Chance, Age

Between:
- wars, droughts, famines and natural hazards

Question 3

4.2.2 - What are the measurements of income inequality?

Answer 3

• The Lorenz Curve

- The Gini Coefficient

Question 4

4.2.2 - What does the Lorenz curve show?

Answer 4

• shows the cumulative % of the population plotted against the cumulative % of income that those people have, the degree of the bend away from that straight line indicates the degree of inequality

Question 5

4.2.2 - What does the Gini coefficient measure?

Answer 5

Formula: A/(A+B)

• the ration of the areas between the 45 degree line and the Lorenz curve divide by the whole triangle under the 45 degree curve
• Measure between 1 and 0 and the bigger the coefficient the more unequal the country

Question 6

4.2.2 - What is the impact of economic change and development?

Answer 6

• Kuznets hypothesis says that as society develops and moves from agriculture to industry, inequality increases as wages of industrial workers rises faster than farmers

Question 7

4.2.2 - What is the significance of capitalism?

Answer 7

• a capitalist economy leads to income inequality because of wage differentials
• individuals also own resources and this wealth differs based on assets owned
• inequality essential for capitalism to work