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A LevelEconomicsEdexcelEconomics AFlashcards4. A Global Perspective4.2 Poverty & Inequality

4.2 Poverty & Inequality (Edexcel A Level Economics A)

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  • What is absolute poverty?

    Absolute poverty is where individuals cannot afford to acquire the basic necessities for a healthy and safe existence.

  • What is relative poverty?

    Relative poverty is a measure that considers a person's income in comparison to the overall standard of living in their country. A person is considered relatively poor if their income falls below the median income threshold.

  • True or False?

    The World Bank defined absolute poverty as living on less than $1.90 a day in 2022.

    True.

    The World Bank defined absolute poverty as living on less than $1.90 a day in 2022.

  • What percentage of median household income defines relative poverty in the UK?

    Relative poverty in the UK is defined as households living on less than 60% of the median household income.

  • How does economic growth affect absolute poverty?

    Economic growth decreases absolute poverty as it increases household incomes.

  • What measures can be taken by the government to reduce absolute poverty?

    The government can use tax and spending policies to support the most vulnerable groups in society. No household should be living in absolute poverty in developed economies.

  • How can rising asset prices affect relative poverty?

    Rising asset prices can decrease relative poverty. Households that own their own properties will benefit as asset prices often increase faster than wages or income.

  • What is the effect of trade liberalisation on poverty?

    Trade liberalisation increases global output. This increases the demand for labour which increases wage rates. This can pull households out of relative poverty.

  • True or False?

    Absolute poverty can decrease while income inequality increases.

    True.

    Absolute poverty can decrease even while income inequality increases. The income of wealthier households rises faster than the incomes of poorer households.

  • What was the relative poverty rate in the UK in early 2022?

    In early 2022, 22% of the UK population was in relative poverty.

  • How has global absolute poverty changed since 1990?

    There has been a significant decrease in absolute poverty since 1990. This has fallen from 1.9 billion people to 750 million by 2022.

  • Which type of poverty is most common in developed countries?

    Relative poverty is the main type of poverty that occurs in developed countries.

  • What is income inequality?

    Income inequality refers to the unequal distribution of income across the population of a country. Income includes wages, rent, interest and dividends.

  • Define wealth inequality.

    Wealth inequality refers to the unequal distribution of assets across the population of a country. Assets include property, savings and shares.

  • State the two main measures of income inequality.

    The two main methods used to measure income inequality are the Lorenz curve and the Gini coefficient.

  • What does the Lorenz curve represent?

    The Lorenz curve is a visual representation of the inequality that exists between households in an economy.

  • How is the Gini coefficient calculated?

    Formula.

    Gini Coefficient = fraction numerator bold A over denominator stretchy left parenthesis A plus B stretchy right parenthesis end fraction

    A is the area between the line of perfect equality and the Lorenz curve.

    B is the area below the Lorenz curve.

  • What does a Gini coefficient of 0 represent?

    A Gini coefficient of 0 represents perfect equality. There is no inequality.

  • True or False?

    A higher Gini coefficient indicates a more equal income distribution.

    False.

    A higher Gini coefficient indicates a more unequal income distribution.

  • How do higher levels of education and skills affect income inequality?

    Higher education and skill levels generally lead to higher income levels. Countries with less access to education tend to have greater inequality.

  • What is the Kuznets curve?

    The Kuznets curve shows how income inequality changes as an economy develops through the primary, secondary and tertiary sectors. It illustrates the impact of industrialisation and development on inequality.

  • How does capitalism affect inequality?

    Capitalism supports the use of free market forces to allocate resources. Workers with higher skills will receive higher wages. Individuals with higher incomes can acquire more assets which leads to even higher levels of income and wealth. This increases inequality.

  • What is the aim of a national minimum wage (NMW)?

    The aim of a national minimum wage (NMW) is to reduce income inequality.

  • How can asset ownership affect income inequality?

    Greater asset ownership in an economy leads to higher income inequality as assets generate income. For example, property generates rent as an income.

Previous:4.1 International EconomicsNext:4.3 Emerging & Developing Economies

    1. Topic 1

      1.1 Nature of Economics

    2. Topic 2

      1.2 How Markets Work

    3. Topic 3

      1.3 Market Failure

    4. Topic 4

      1.4 Government Intervention

    1. Topic 1

      2.1 Measures of Economic Performance

    2. Topic 2

      2.2 Aggregate Demand (AD)

    3. Topic 3

      2.3 Aggregate Supply (AS)

    4. Topic 4

      2.4 National Income

    5. Topic 5

      2.5 Economic Growth

    6. Topic 6

      2.6 Macroeconomic Objectives & Policies

    1. Topic 1

      3.1 Business Growth

    2. Topic 2

      3.2 Business Objectives

    3. Topic 3

      3.3 Revenues, Costs & Profits

    4. Topic 4

      3.4 Market Structures

    5. Topic 5

      3.5 Labour Market

    6. Topic 6

      3.6 Government Intervention

    1. Topic 1

      4.1 International Economics

    2. Topic 2

      4.2 Poverty & Inequality

    3. Topic 3

      4.3 Emerging & Developing Economies

    4. Topic 4

      4.4 The Financial Sector

    5. Topic 5

      4.5 Role of the State in the Macroeconomy