2.7 Income Distribution And Welfare Flashcards
Define wealth
Wealth is defined as a stock of assets such as a house, shares, land and savings
Define income
Income is money received on a regular basis. It could be from a job, welfare payments, interest or dividends
Why is achieving even distribution of income important
High levels of poverty through unequal distribution of income may result in lower levels of health
Having more equal income distribution may encourage less of a divide between high and low income earners in society
How is the Lorenz curve and Gini coefficient displayed on a diagram
What does the Lorenz curve show
The actual distribution of income and wealth
What does the gini coefficient show
A numerical value for inequality and is derived from the Lorenz curve
A value of 0 indicates perfect equality
A value of 1 indicates perfect inequality
What is meant by absolute poverty
It is defined as living below subsistence
The person is unable to meet basic needs
World bank uses a measurement based on people living on less than $1.25 per day
What is meant by relative poverty
It is measured by comparison to average in the country
Those with below 60% of the median income are considered to be in relative poverty
What are the causes of poverty and inequality
Inequality in wages or unemployment
Welfare payments
Taxes
Health problems
Wars and conflict
Corruption
Natural disasters
Inequality between countries
What are some consequences of poverty and inequality
Can motivate workers and encourage them to train and learn new skills
Wealth is often passed through generations meaning it is often concentrated in a few families
Can discourage lower income households from participating in society
What is the impact of poverty on health
High rates of poverty can lead to lower life expectancies and poorer standards of health
What is the impact of poverty on society
Could result in poor housing, crime and mental health issues
Can also create problems within communities
What is the impact of poverty on poor sanitation
People in poverty cannot afford basic levels of sanitation and clean water is rare
People become more vulnerable to fatal diseases
What is the impact of poverty on education
Families might have to choose between education and food
Children might be sent to work which leaves them with poor literacy skills
This all limits their ability to escape poverty as an adult
What is the impact of poverty on the economy
Without basic education, the higher paying jobs are not accessible
Hinders the economy’s ability to improve its productive potential
