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Economics basic quesions.

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Introduction

Neal Smith Economics Homework Mr Henshaw 1 (a) Economics distinguish between absolute poverty and relative poverty. People are said to be in absolute poverty when their income is insufficient for them to be able to afford basic shelter, food and clothing. Even in rich countries there are some people who still do not have any housing. It has been estimated that in England in 2000 there were 1600 people sleeping rough. Of course, the problem of absolute poverty is more extensive in poor countries. While people in the UK may consider themselves to be poor if they are living in poor accommodation, have a television but no video recorder and can only afford to go out once a week although this may be considered to be well off in a country like Uganda. This reflects the difference between absolute and relative poverty. People are relatively poor when they are poor in comparison to other people. They are those who are unable to afford a certain standard of living at a particular time. ...read more.

Middle

Another was the rise in top executive pay, which was sparked initially by privatisation. At the other end of the income range there was a decrease in the real value of benefits, particularly job seekers allowance, and a rise in the number of lone parents. The percentage of families with dependant children that are headed by lone parents more than doubled between 1971 and 1996. The lack of support in bringing up the children means lone parents are often not in work or only in part-time jobs. Since 1979, this trend has been growing. In 1980 the poorest 10 percent of the population saw their annual incomes after housing costs haven been taken into account fall by nearly 20 percent. In contrast, average incomes after housing costs have been taken into account fall by nearly 20 percent. In contrast, average incomes after housing costs rose by around 35 percent whilst the top ten percent increased their incomes 61 percent. The majority of the population over the period received an increase in income, which was below the average, whilst the top 30 percent received increases above the average. ...read more.

Conclusion

Manipulating tax on incomes can help the lower wage rate earners by the government abolishing bottom rates of income tax. The poverty trap arises when the poor find it difficult to raise their disposable incomes because any rise in gross income results in them having to pay more in taxes and receiving fewer benefits. This aims to reduce the extent of poverty trap by providing a greater incentive for people to work. It also keeps people in employment and not claiming social benefits, which cost the government millions in revenue. It is in the government's interest to reduce inequality of income distribution as they gain most of their revenue from taxes. Operating a national minimum wage. If set above the equilibrium rate this will help the low paid who stay in employment. However, there are disputes about the effect that such a measure may have on the employment of unskilled workers. Also, as mentioned above, not all the low paid are poor and not all the poor are in low paid jobs. If the economy is in recession then the government will increase public and social spending to help close the poverty trap between the lowest earning 10% of the Uk. ...read more.

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