Poverty and Inequality

    OCR
    GCSE

    Candidates must analyze the distribution of income and wealth within and between economies, distinguishing rigorously between absolute and relative poverty. Assessment requires the application of quantitative measures, specifically the Lorenz Curve and Gini Coefficient, to diagnose inequality. Candidates must evaluate the causal mechanisms of poverty, including wage differentials, asset bubbles, and globalization, and critically assess the efficacy of interventionist policies such as progressive taxation, transfer payments, and supply-side improvements against the trade-off of economic efficiency.

    5
    Objectives
    4
    Exam Tips
    4
    Pitfalls
    3
    Key Terms
    4
    Mark Points

    Learning Objectives

    What you need to know and understand

    • Definition of Relative Poverty: Household income below 60% of median income.
    • Gini Coefficient scale: 0 (perfect equality) to 1 (perfect inequality).
    • Lorenz Curve axes: Cumulative % of Population (x) vs Cumulative % of Income (y).
    • Progressive Tax: Tax rate increases as taxable amount increases (e.g., UK Income Tax bands).
    • Universal Credit: The primary UK benefit payment intended to simplify the welfare system.

    Marking Points

    Key points examiners look for in your answers

    • Award marks for clear distinction between income (flow) and wealth (stock) inequality.
    • Credit accurate interpretation of the Gini coefficient: 0 represents perfect equality, 1 represents perfect inequality.
    • Responses must analyse the mechanism of progressive taxation in reducing the gap between gross and net income.
    • Evaluation must weigh the benefits of redistribution against potential disincentives to work or enterprise (the poverty trap).

    Examiner Tips

    Expert advice for maximising your marks

    • 💡When drawing the Lorenz curve, ensure the 'cumulatives' are on both axes; failure to label axes correctly caps marks.
    • 💡In 'Evaluate' questions, explicitly contrast short-term fiscal redistribution with long-term supply-side improvements.
    • 💡Use the data provided: quote specific percentages or Gini values to support arguments for AO2 marks.
    • 💡Conclude with a judgment on the 'most effective' policy, justifying why it supersedes others in the specific context.

    Common Mistakes

    Pitfalls to avoid in your exam answers

    • Conflating absolute poverty (inability to meet basic needs) with relative poverty (income below 60% of median).
    • Confusing the axes or the line of perfect equality with the Lorenz curve itself.
    • Asserting that higher taxes always reduce poverty without considering tax incidence or evasion.
    • Failing to link supply-side policies (education/training) to long-term structural unemployment reduction.

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    Comprehensive revision notes & examples

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    Key Terminology

    Essential terms to know

    Likely Command Words

    How questions on this topic are typically asked

    State
    Calculate
    Explain
    Analyse
    Evaluate
    Discuss

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