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1.5 marksIncome Inequality, Poverty and Poverty Alleviation

CAPE Economics Unit 1 · 2007 · Paper 2 · Question 5(a)(ii)

Figure 1 displays Lorenz curves showing household income distributions before and after taxes and subsidies.

State what the vertical axis represents in Figure 1.

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Other parts of this question

  1. 5(a)(i)State what the diagonal line represents in Figure 1.[2 marks]
  2. 5(a)(iii)State what the horizontal axis represents in Figure 1.[1.5 marks]
  3. 5(a)(iv)State what Curve (b) represents in Figure 1.[1.5 marks]
  4. 5(a)(v)State what Curve (c) represents in Figure 1.[1.5 marks]
  5. 5(b)(i)Discuss the role of the diagonal line in depicting income inequality.[6 marks]
  6. 5(b)(ii)Explain what Lorenz curves (b) and (c) indicate regarding the distribution of household income between the highest 20% and lowest 20% of households.[10 marks]
  7. 5(b)(iii)Comment on the significance of the area between Curve (b) and Curve (c).[4 marks]
  8. 5(b)(iv)State which distribution, (b) or (c), yields a higher Gini coefficient, explaining your reasoning.[4 marks]
  9. 5(c)Explain the difference between absolute poverty and relative poverty.[6 marks]
  10. 5(d)Explain the term 'social welfare' and discuss how government subsidies for education influence social welfare.[12 marks]

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