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Economics 4.2
Economics- Edexcel 4.2
| Term | Definition |
|---|---|
| Absolute poverty other name | extreme poverty |
| Absolute poverty definition | when a household does not have sufficient income to sustain even a basic acceptable standard of living and enough income to meet people’s basic needs |
| Absolute poverty thresholds | vary between developed and developing countries |
| Main extreme poverty line | percentage of population living below $1.90 a day (PPP) |
| National poverty line in lower-middle-income countries | percentage of population living below $3.10 a day (PPP) |
| National poverty line in upper-middle-income countries | percentage of population living below $5.50 a day (PPP) |
| Extreme poverty is multidimensional, why? | it is about more than low income per capita |
| Relative poverty | those with a level of household income considerably lower than the median level of income within a country |
| Official UK relative poverty line | household disposable income of less than 60% of median income |
| Why is median income preferred when looking at relative poverty? | the median per capita reveals the progress of a ‘typical’ person and isn’t influenced by the tails of distribution from the lowest and highest income families |
| Extreme poverty is declining or increasing according to the World Bank? | declining |
| Shared or inclusive prosperity | when economic growth increases the incomes and consumption of people in the poorest 40 per cent of the population |
| Main causes of absolute poverty | higher population growth than GDP/severe households savings gap/absence of gov services/endemic corruption/high debt/civil wars/disasters/low formal employment/no property rights |
| Endemic corruption | heads of government bureaucracies are corrupt in the procedures and criteria for personal advancement in the government bureaucracy |
| Formal employment | long-term and contracted |
| Main determinant of per capita income | level of labour productivity measured by real GDP per person adjusted for PPP |
| Factors limiting the value of labour productivity in low-income countries | low rate s of urbanisation/weak human capital/infrastructure gaps/gender inequalities/malnourishment/limited economies of scale/dependency on low value-added industries |
| Value-added of an industry | The contribution of private industry or a government sector to overall gross domestic product (GDP) |
| Relative poverty occurs because | income and consumption are skewed across households, communities and regions |
| MDPI | multi-dimensional poverty index |
| Purpose of MDPI | go deeper than basic HDI by looking at a person’s deprivation across 10 indicators |
| Measures of inequality | quintile ratio, palma ratio, gini coefficient |
| Quintile ratio | ratio of average income of richest 20% of population to average income of poorest 20% of population |
| Palma ratio | ratio of the richest 10% of the population’s share of gross national income divided by the poorest 40%’s share |
| Gini coefficient | gini index of 0 represents perfect equality, index of 100 implies perfect inequality |
| Lorenz curve | visual interpretation of income or wealth inequality |
| Country with highest gini coefficient 2023 | south africa - 63.0 |
| Country with lowest gini coefficient 2023 | slovenia - 24.6 |
| ‘hollowing-out ‘ effect | the disappearance of middle-class manufacturing jobs and spending power as socioeconomic stratification intensifies |
| Kuznets inequality curve | inequality rises during a phase of rapid industrialisation & urbanisation but eventually increased state welfare provision, progressive income & taxes, balanced income growth lead to a fall in overall inequality |
| Main pillars of free-market capitalist economic system | private property/self-interest/competition in markets/operation of the price mechanism/freedom of choice/limited role for government |
| What reduces the profit motive’s contribution to high income and consumption inequality in a capitalist society? | people are motivated to run businesses as social enterprises, co-operative businesses, taxes on high profits and incomes, competition policy and intervention to control monopoly profits & keep prices down |
| Co-operative businesses | a business or organisation that's owned and controlled by its members, to meet their shared needs |
| What reduces the capitalist’s labour market contribution to high income and consumption inequality in a capitalist society? | minimum wage, legal caps on executive pay, legal protections for employees, gov investment in human capital promoting skills and employability |
| Thomas Piketty | argued that rising inequality was an inevitable consequence of capitalism |
| Critics of Thomas Piketty | capitalism has helped make the world a more equal place, e.g. through globalisation |
| Gross income | amount of money earned before direct taxes & other deductions |
| Household income | flow of weekly or monthly earnings from wages & salaries ,interest, dividends and rental income |
| Household wealth | the value of a stock of assets such as property, shares, pension funds and other long-term savings |
| S80/S20 | ratio of income received by 20% of people with highest income to that received by the 20% with the lowest income |
Created by:
jessharris
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