4.2

• Explain the distinction between absolute poverty and relative poverty

  Absolute- not enough income for basic needs

  Relative- if income is 60% or less of the median income
• What are the causes of changes in absolute poverty

  • Natural disasters
  • War
  • Lack of benefit system
  • Lack of economic growth/development
• What are the causes of changes in relative poverty

  • Unemployment
  • Regressive tax
  • Poverty trap
• Explain the distinction between wealth and income inequality


  Income is a flow concept eg. the money earned by a person over a period of time

  Wealth is the stock of assets a person owns
• Evaluate the causes of income and wealth inequality within countries and between countries

  Education quality

  Unemployment/Underemployment

  Level of Intervention

  Taxation
• Measures to reduces poverty and inequality

  • Improved training
  • Labour legislation to protect against discrimination
  • Policies to decrease geographical immobility
  • Policies to decrease assets prices eg. Inheritance tax
  • Increased unemployment benefits
  • increased National Minimum wage
  • Decrease regressive tax
  • Increase progressive tax
• What is the evaluation of Improved training?

  IS it the right training?
• Eval to policies aiming to decrease discrimination

  How is it being enforced

  Extra costs to firms
• Eval of policies aiming to decrease geographical immobility?

  Expensive

  Opportunity Costs
• Eval of policies to decrease asset prices

  May find loopholes eg. Tax avoidance unless always updated
• Eval: Increased unemployment benefits

  Increased opportunity costs

  Poverty Trap
• Eval: Increase national minimum wage

  Unemployment may rise due to higher costs for firms
• Eval: Increase progressive tax

  Disincentive to work

  Brain drain
• Eval: Decrease regressive tax

  Lower government tax revenue
• What is the equation of Gini coefficient

  $SectionA/SectionA+$$B$