Edexcel International A Level Economics
Edexcel International A Level Economics Poverty and Inequality Exam Questions
Free Edexcel International A Level Economics exam questions for Poverty and Inequality, with a mark scheme for every pack. Covers absolute and relative poverty, causes of poverty, income and wealth inequality, Lorenz curves, Gini coefficients and redistributive policies.
Poverty and Inequality exam questions
1 question pack 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 Edexcel International A Level Economics Poverty and Inequality
Poverty and inequality is a Unit 4 topic in Edexcel International A Level Economics. You learn the difference between absolute and relative poverty, the causes of each, and the difference between income and wealth inequality. You also learn how inequality is measured using the Lorenz curve and Gini coefficient, and how inequality is affected by economic growth, globalisation and government policy. The topic links to labour markets in Unit 3, because wage differences are a major cause of inequality, and to the role of the state in the macroeconomy, through taxation and spending. Examiners like questions on interpreting Gini data and evaluating redistributive policies.
What you need to know
- Absolute and relative poverty Absolute poverty is when a household cannot afford basic needs such as food, shelter and clean water; the World Bank uses an international poverty line. Relative poverty is income well below the average, often defined as below 60% of median income.
- Causes of poverty Unemployment, low wages, lack of education and skills, sickness and disability, old age, family structure, and, in developing countries, lack of infrastructure and conflict.
- Income and wealth inequality Income inequality is the unequal distribution of earnings and other income. Wealth inequality is the unequal distribution of assets and is usually greater, partly because wealth can be inherited.
- Measuring inequality The Lorenz curve plots the cumulative share of income against the cumulative share of population. The Gini coefficient is the area between the line of equality and the Lorenz curve divided by the total area under the line of equality, from 0 (perfect equality) to 1.
- Policies Progressive taxation, means-tested and universal benefits, minimum wages, education and training, and provision of public services. The effect of capitalism and growth on inequality is debated.
Common mistakes in Poverty and Inequality
- Using absolute and relative poverty interchangeably. Absolute poverty is about basic needs; relative poverty is about income compared with others in the same society.
- Saying relative poverty will disappear with growth. If incomes at the bottom rise more slowly than the median, relative poverty can persist or rise.
- Reading the Gini coefficient backwards. A higher Gini means greater inequality.
- Assuming all inequality is bad. Some inequality may create incentives to work and invest, so discuss the trade-off with efficiency.
- Ignoring disincentive effects of redistribution. High marginal tax rates or benefit withdrawal can reduce incentives to work.
Try three Poverty and Inequality exam-style questions
1. The area between the line of equality and a country's Lorenz curve is 0.18, and the total area under the line of equality is 0.5. Calculate the Gini coefficient. (2 marks)
Show the mark scheme answer
Gini = 0.18 / 0.5; = 0.36.
2. Explain two causes of income inequality in a developed economy. (4 marks)
Show the mark scheme answer
Differences in skills and education lead to different marginal revenue products and wages; differences in wealth produce unequal income from rent, interest and dividends; globalisation and technology increase demand for skilled workers; weaker trade unions; regressive tax system; two causes explained.
3. Evaluate the use of progressive income taxes to reduce inequality. (12 marks)
Show the mark scheme answer
Higher earners pay a higher proportion of income, narrowing post-tax income gaps; revenue funds benefits and public services; evaluation: disincentive effects on work and enterprise; tax avoidance and evasion; capital flight and brain drain; does not tackle wealth inequality; combined policies such as education may be more effective in the long run; supported judgement.
Poverty and Inequality FAQs
What does Edexcel IAL Economics Poverty and inequality cover?
It covers absolute and relative poverty and their causes, income and wealth inequality, the Lorenz curve and Gini coefficient, and policies to reduce inequality.
Which unit is Poverty and inequality examined in?
It is part of Unit 4, Developments in the global economy.
How do I interpret a Lorenz curve?
The further the curve sits from the 45 degree line of equality, the more unequal the distribution. A curve moving towards the line over time shows inequality is falling.
