Economics 4.2 Revision

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What is absolute poverty?
When individuals do not have the resources to be able to consume sufficient necessities to survive
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What is relative poverty?
Poverty which is defined relative to existing living standards for the average individual.
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What are the causes of poverty?
No job/ Lack of human capital e.g. education and training/ Lack of financial capital e.g. for retired people/ Health problems/ Depending on others/ Inheritance/ Addictions e.g. gambling
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What is the gini coefficient?
A statistical measure of inequality of inequality of income. Its value ranges from 0, where there is perfect equality of income, to 1 where income is highly unequal with 1 person having all the income. The gini index is the gini coefficient x 100.
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What is horizontal equity and vertical equity?
Horizontal equity- The identical treatment of identical individuals in identical situations. Vertical equity- The different treatment of individuals which are dissimilar in characteristics.
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What is progressive tax?
A tax where the higher the income of the taxpayer, the larger the proportion of income is paid in tax.
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What is proportional tax?
A tax where as the income of taxpayers increases, the same proportion of income is paid in tax.
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What is regressive tax?
A tax where the higher the income of the taxpayer, the smaller the proportion of income is paid in tax
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What is the Lorenz curve?
A graphical representation of the degree of income or wealth inequality in society.
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What is wealth?
Wealth relates to differences in peoples stock of assets.
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Give some causes of income inequality?
Education/wage rate/strength of trade unions/degree of employment protection/social benefits/pension entitlements
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Give some causes of wealth inequality?
Ownership of assets/Inheritance
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Is inequality likely to be higher in or lower in free market or planned economies?
Inequality is likely to be higher in free market economies since people with higher skills will attract higher wages. Private ownership of resources means that some people will acquire more assets than others which may generate income.
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Other cards in this set

Card 2

Front

What is relative poverty?

Back

Poverty which is defined relative to existing living standards for the average individual.

Card 3

Front

What are the causes of poverty?

Back

Preview of the front of card 3

Card 4

Front

What is the gini coefficient?

Back

Preview of the front of card 4

Card 5

Front

What is horizontal equity and vertical equity?

Back

Preview of the front of card 5
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