Theme 4: Poverty and Inequality Flashcards
(16 cards)
What is Absolute poverty
Absolute poverty is being unable to afford the basic necessities such as food, clean water and shelter.
How is absolute poverty measured?
The World Bank measures it by looking at the number of people living on less than $2.15 a day.
What is Relative poverty
Relative poverty is defined as earning less than a particular percentage of a country’s average income.
How is Relative poverty measured?
In the UK, a person is in relative poverty if they earn less than 60% of the median UK income.
What are the 3 most important factors influencing poverty rates?
1) Infrastructure
2) Education & Training
3) Aid
What are the 2 types of inequality?
1) income inequality
2) wealth inequality
What is Income inequality
When the best paid workers take home more income than the rest of a country’s workers.
What is the Lorenz curve?
A graph to show income inequality. The further a Lorenz curve is from the 45° line of perfect equality, the more unequal the economy is.
What is the Gini Coefficient?
A measure of income inequality. The higher the number, the more unequal the economy is.
Draw the Lorenz curve
The vertical axis needs to be labelled with Cumulative % of Income and the horizontal axis needs to be labelled with Cumulative % of Population. The line of perfect equality needs to be drawn from bottom left to top right. Since the question states that the country does not have significant inequality the Lorenz curve should be drawn bending close to the line of perfect equality.
What is Wealth inequality?
When assets are not shared equally between individuals
What is Assortative Mating?
When rich, successful people marry other rich, successful people.
What does the r > g hypothesis describe?
If r, the rate of return on wealth, is greater than g, the rate of income growth, then wealth will grow faster than incomes.
What are the 5 causes of changes in inequality?
1) Minimum Wage Rates
2) Assortative Mating
3) Social Benefits & Tax
4) “R>G” Hypothesis
5) Inheritance
What are capitalists?
People who own and use any of the factors of production in the hope of making money
What do economists refer to capitalism as?
They are describing an economy with capitalists in it
