4.2.1 inequality

Question 1

what is income?

Answer 1

flow of money going to factors of productions

Question 2

what are the positives of income inequality?

Answer 2

• incentive to work = more efficiency = more productivity
• encourage enterprise = innovation = rich get rich = more enterprise ( trickle down economics )

Question 3

what are the negatives of income inequality?

Answer 3

• lower standards of living
• poverty trap
• crime + anti-social behaviour

Question 4

What is the Lorenz curve?

Answer 4

• interpretation of income or wealth inequality
• diagonal line shows a situation of perfect equality of income
• further the Lorenz curve bows out = the more unequal the distribution of income

Question 5

What is the gini coefficient? And what are the values?

Answer 5

• measures the distance there is between the line of equality
• closer to 1 = more inequality
• closer to 0 = closer to equality

Question 6

What is the Kuznets curve?

Answer 6

• as countries ‘take-off’ in their development = leads to considerable wealth creation for the few who quickly gain from development relative to others

Question 7

Evaluation for the kuznets curve?

Answer 7

• cannot be applied to every country
• only works in the long run - time lag