AQA A Level Economics
AQA A Level Economics 3.1.7 The Distribution of Income and Wealth: Poverty and Inequality Exam Questions
Free AQA A Level Economics exam questions for 3.1.7 The Distribution of Income and Wealth: Poverty and Inequality, with a mark scheme for every pack. Covers income and wealth, equity, Lorenz curves, the Gini coefficient, absolute and relative poverty and policies to reduce inequality.
3.1.7 The Distribution of Income and Wealth: Poverty and Inequality exam questions
3 question packs of real past exam questions, each with its mark scheme. Do not stop after a few: answer as many as you can without notes, then mark every answer with the mark scheme. The more questions you do, the more quickly you will spot how examiners ask about each idea.
About AQA A Level Economics 3.1.7 The Distribution of Income and Wealth: Poverty and Inequality
The distribution of income and wealth is section 3.1.7 of AQA A Level Economics and is examined on Paper 1. It distinguishes between income (a flow) and wealth (a stock), and between equality and equity. It covers how inequality is measured using the Lorenz curve and Gini coefficient, the causes of inequality between people and over time, absolute and relative poverty and their causes and effects, and the policies governments use to reduce poverty and inequality, such as progressive taxation, transfer payments, the national minimum wage and spending on education. It builds on the labour market and links to fiscal policy. Examiners often ask for evaluation of redistribution policies.
What you need to know
- Income and wealth Income is a flow of money received over a period, such as wages, rent, interest, profit and benefits. Wealth is a stock of assets, such as property, shares and savings. Wealth is usually more unequally distributed than income.
- Equality and equity Equality means people have the same, for example the same income. Equity means fairness, which is a normative idea; an equitable distribution is not necessarily equal.
- Measuring inequality The Lorenz curve plots cumulative share of income against cumulative share of the population; the further it lies from the line of perfect equality, the greater the inequality. The Gini coefficient is the area between the line and the curve divided by the total area beneath the line, from 0 (perfect equality) to 1.
- Causes of inequality Differences in skills, education and wages, inheritance of wealth, unemployment, age, household structure, discrimination and changes in the tax and benefit system. Globalisation and technological change can widen gaps.
- Poverty Absolute poverty is lacking resources for basic needs; relative poverty is having income well below the average, often defined in the UK as below 60 percent of median household income. Causes include unemployment, low wages, ill health and family circumstances.
- Government policy Progressive taxes, means-tested and universal benefits, the national minimum wage, and spending on education, training and healthcare can reduce inequality. Evaluate effects on incentives to work, the poverty trap and the cost to government.
Common mistakes in 3.1.7 The Distribution of Income and Wealth: Poverty and Inequality
- Using income and wealth interchangeably. Income is a flow and wealth is a stock; a person can have high wealth but low income.
- Saying equity means equal shares. Equity is about fairness, which involves value judgements.
- Misreading a Lorenz curve. A curve further from the 45 degree line means more inequality, and a higher Gini coefficient.
- Assuming that if absolute poverty falls, relative poverty must also fall. If median income rises faster than the incomes of the poorest, relative poverty can rise.
- Ignoring disincentive effects. Higher taxes or withdrawal of benefits can reduce incentives to work, so evaluate policies rather than just describing them.
Try three 3.1.7 The Distribution of Income and Wealth: Poverty and Inequality exam-style questions
1. Distinguish between absolute and relative poverty. (4 marks)
Show the mark scheme answer
Absolute poverty is when a household lacks enough income to meet basic needs such as food, shelter and clothing; it is not linked to other people's incomes; relative poverty is when income is low compared with the average in that society; commonly defined as below 60 percent of median household income.
2. Explain how a Lorenz curve is used to show inequality, and what a rise in the Gini coefficient means. (4 marks)
Show the mark scheme answer
The Lorenz curve shows the cumulative percentage of income received by the cumulative percentage of households; the diagonal is the line of perfect equality; a curve further from the diagonal shows greater inequality; a rise in the Gini coefficient means income is distributed more unequally.
3. Evaluate the use of more progressive income taxes to reduce income inequality. (15 marks)
Show the mark scheme answer
Progressive taxes take a higher proportion of income from higher earners, narrowing post-tax income gaps; revenue can fund benefits and public services for poorer households; evaluate: may reduce incentives to work or invest; may encourage tax avoidance or migration of high earners; Laffer curve arguments; does not address wealth inequality directly; effect depends on how revenue is spent; supported judgement.
3.1.7 The Distribution of Income and Wealth: Poverty and Inequality FAQs
What does AQA A Level Economics 3.1.7 cover?
It covers income and wealth, equality and equity, Lorenz curves and the Gini coefficient, causes of inequality, absolute and relative poverty, and government policies to reduce poverty and inequality.
Which paper is 3.1.7 examined in?
It is assessed on Paper 1, Markets and market failure, and can also appear on Paper 3, Economic principles and issues, which draws on the whole specification.
How do I evaluate policies to reduce inequality?
For each policy, explain how it changes the distribution, then weigh up the effect on incentives, government finances, efficiency and whether it targets the right people. Use context from the data to support your judgement.
