2.1 Absolute and Relative Poverty

Question 1

What is absolute poverty?

Answer 1

People are not able to afford basic necessities such as food, water and shelter
(below $1.90 a day)

Question 2

What is relative poverty?

Answer 2

People whose incomes are well below average within an economy (below 60% of median income)

Question 3

Causes of absolute poverty?

Answer 3

1) Lack of education
2) Absence of govt services
3) Severe households savings gap

Question 4

Causes of relative poverty?

Answer 4

1) Cuts in top rate income taxes
2) Regressive effects
3) Lack of affordable services

Question 5

What is the MDPI?

Answer 5

• Multi-Dimensional Poverty Index
• 10 indicators
• 25% in MDP

Question 6

Measures of Inequality?

Answer 6

1) Gini Coefficient
(0-100 perfect equality - in)
2) Quintile Ratio
(top 20% / bottom 20% income)
3) Palma Ratio
(top 10% gross income/ bottom 40%)

Question 7

What is the Lorenz Curve?

Answer 7

Diagrammatic representation of income/ wealth inequality

Question 8

How to calculate the Gini Coefficient on the Lorenz Curve?

Answer 8

Area A / Area A+B

Question 9

Causes of inequality within a country?

Answer 9

• Regressive taxes
• Lack of affordable services
• Wage differentials
• Structural unemployment

Question 10

Causes of inequality between countries?

Answer 10

• Low life expectancy
• Lack of education
• Gender gaps
• Lack of healthcare

Question 11

What is the Kuznets Inequality Curve?

Answer 11

Inequality rises during rapid industrialisation but is reversed by progressive policies

Question 12

What did Thomas Picketty argue?

Answer 12

Rising wealth inequality leads to rising income inequality

Question 13

Effects of capitalism on inequality?

Answer 13

1) Private property
2) Profit Motive
3) Self-interest

Question 14

Why might inequality not be bad?

Answer 14

1) Wage differentials
2) incentive to work
3) Lower top rate taxes may encourage entrepreneurs