2281 · 5.2
Poverty flashcards
Revision flashcards for Cambridge 2281 Poverty (syllabus 5.2). Flip, recall, then mark a real past-paper question.
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Equity vs equality?
Equity = fairness (may allow unequal outcomes if deserved); equality = same outcomes — not always identical in policy debate.
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Progressive vs regressive tax?
Progressive: average rate rises with income (e.g. income tax bands). Regressive: poor pay higher proportion (e.g. flat VAT on necessities).
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What is the Gini coefficient?
Measure of income inequality from 0 (perfect equality) to 1 (one person has all income) — derived from the Lorenz curve.
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Transfer payments?
Government payments redistributing income — pensions, unemployment benefit, housing support — not payment for G&S.
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Equity–efficiency trade-off?
Higher redistribution may reduce work incentives and investment (efficiency cost) while improving living standards for low earners (equity gain).
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Wealth vs income inequality?
Income is flow (wages, profits); wealth is stock (assets minus debts) — wealth often more unequally distributed than income.
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Lorenz Curve
A graph showing the cumulative percentage of total national income or wealth against the cumulative percentage of the population. The greater the curve's deviation from the 45-degree line of perfect equality, the greater the inequality.
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Vertical Equity
The principle that those with a greater ability to pay should contribute a larger proportion of their income or wealth in tax. It is the core justification for progressive taxation.
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Transfer Payments
Payments made by the government to individuals, for which no good or service is provided in return. Examples include unemployment benefits, state pensions, and child benefit.
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Gini Coefficient
A statistical measure of inequality, ranging from 0 (perfect equality) to 1 (perfect inequality). It is calculated as the ratio of the area between the Lorenz curve and the line of equality to the total area under the line of equality (Area A / (Area A + B)).
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The 'Leaky Bucket' Analogy
An analogy illustrating the equity-efficiency trade-off. When redistributing income from the rich to the poor, some economic value is 'lost' due to administrative costs and the disincentive effects of taxes and benefits, reducing overall economic output.