Economics- Edexcel 4.2
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| Absolute poverty other name | extreme poverty
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| 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
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| Absolute poverty thresholds | vary between developed and developing countries
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| Main extreme poverty line | percentage of population living below $1.90 a day (PPP)
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| National poverty line in lower-middle-income countries | percentage of population living below $3.10 a day (PPP)
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| National poverty line in upper-middle-income countries | percentage of population living below $5.50 a day (PPP)
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| Extreme poverty is multidimensional, why? | it is about more than low income per capita
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| Relative poverty | those with a level of household income considerably lower than the median level of income within a country
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| Official UK relative poverty line | household disposable income of less than 60% of median income
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| 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
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| Extreme poverty is declining or increasing according to the World Bank? | declining
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| Shared or inclusive prosperity | when economic growth increases the incomes and consumption of people in the poorest 40 per cent of the population
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| 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
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| Endemic corruption | heads of government bureaucracies are corrupt in the procedures and criteria for personal advancement in the government bureaucracy
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| Formal employment | long-term and contracted
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| Main determinant of per capita income | level of labour productivity measured by real GDP per person adjusted for PPP
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| 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
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| Value-added of an industry | The contribution of private industry or a government sector to overall gross domestic product (GDP)
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| Relative poverty occurs because | income and consumption are skewed across households, communities and regions
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| MDPI | multi-dimensional poverty index
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| Purpose of MDPI | go deeper than basic HDI by looking at a person’s deprivation across 10 indicators
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| Measures of inequality | quintile ratio, palma ratio, gini coefficient
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| Quintile ratio | ratio of average income of richest 20% of population to average income of poorest 20% of population
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| Palma ratio | ratio of the richest 10% of the population’s share of gross national income divided by the poorest 40%’s share
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| Gini coefficient | gini index of 0 represents perfect equality, index of 100 implies perfect inequality
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| Lorenz curve | visual interpretation of income or wealth inequality
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| Country with highest gini coefficient 2023 | south africa - 63.0
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| Country with lowest gini coefficient 2023 | slovenia - 24.6
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| ‘hollowing-out ‘ effect | the disappearance of middle-class manufacturing jobs and spending power as socioeconomic stratification intensifies
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| 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
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| 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
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| 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
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| Co-operative businesses | a business or organisation that's owned and controlled by its members, to meet their shared needs
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| 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
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| Thomas Piketty | argued that rising inequality was an inevitable consequence of capitalism
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| Critics of Thomas Piketty | capitalism has helped make the world a more equal place, e.g. through globalisation
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| Gross income | amount of money earned before direct taxes & other deductions
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| Household income | flow of weekly or monthly earnings from wages & salaries ,interest, dividends and rental income
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| Household wealth | the value of a stock of assets such as property, shares, pension funds and other long-term savings
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| S80/S20 | ratio of income received by 20% of people with highest income to that received by the 20% with the lowest income
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