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Micro Economics, The distribution of income and wealth
Terms in this set (6)
Explain factors that may determine the distribution of income in the UK
factors include: education/skill level, household composition, wealth, discrimination
Explain how a Lorenz curve may be used to show wealth inequality in an economy
A Lorenz curve is a diagram that shows the extent of income and/or wealth inequality compared to a perfectly equal distribution.
The extent of deviation of the Lorenz curve(s) from the line of perfect equality shows the extent of inequality.
Lorenz curves can also be used in conjunction with the Gini coefficient to calculate inequality.
Distinguish between relative poverty and absolute poverty
Relative poverty is where people are poor in comparison to others, e.g. less than 60% of median income, whilst absolute poverty is where people lack the basic necessities, e.g. food, shelter and warmth.
Explain possible causes of relative poverty
Possible causes include: low level of education/skill, negative discrimination, lack of trade union membership, reliance on benefits, reliance on state pension.
Explain how the state provision of education may alleviate relative poverty
explanation of how effective education may increase labour productivity/MRP, due to being more skilled and having better opportunities to find work
Explain how the distribution of income in the UK has changed over time
Lorenz Curve shifting outwards, showing inequality worsening over time.
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