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A Level · Cambridge (CIE) · 9708

Equity, poverty and redistribution

Equity, poverty and redistribution: build the core model, apply it to evidence and qualify conclusions where outcomes depend on context.

Cambridge International AS & A Level Economics 9708 · 2026–2028 Version 2 / 2029 Version 1 · 8.2

9708 section 8.2; A Level. Checked against Cambridge's 2026–2028 Version 2 (latest version published December 2025) and 2029 Version 1 (published September 2026). Cambridge states that neither version has significant changes affecting teaching. Always follow the syllabus for the candidate's examination year.

Before you begin

    Work on paper. Try each question before revealing help, and explain why your method works.

    Quick readiness check

    What makes relative poverty different from absolute poverty?

    What you will learn

    • Distinguish equity from equality
    • Analyse the equity–efficiency relationship
    • Distinguish absolute and relative poverty
    • Explain the poverty trap
    • Compare policies to improve equity and equality

    Core model and terms

    Equality describes sameness in an outcome or opportunity; equity is a judgement about fairness and may account for need, contribution or starting conditions. Equity and efficiency can conflict when taxes or transfers alter incentives, but the size and direction of any trade-off depend on policy design, service access and the gains from better health or education.

    Apply and evaluate

    Absolute poverty compares resources with a real-needs threshold; relative poverty compares living standards with those typical in a society. A poverty trap can occur when extra earnings trigger a large withdrawal of means-tested support alongside taxes, leaving little additional disposable income. Negative income tax tops up low earnings and phases out with income; universal benefits and a universal basic income broaden coverage, while means-tested benefits target support. Each approach trades off adequacy, take-up, work incentives, administration, cost and distribution.

    Pause and explain

    Which statement best applies equity, poverty and redistribution?

    Put the idea to work

    Worked example

    A worker earns $100 more. A means-tested benefit falls by $60 and tax rises by $20. Calculate the change in disposable income and explain the incentive issue.

    Show the worked solution
    1. Disposable-income gain = $100 − $60 − $20 = $20
    2. The worker keeps only one fifth of the extra earnings
    3. A high combined withdrawal rate can weaken incentives and contribute to a poverty trap

    Answer Disposable-income gain = $100 − $60 − $20 = $20 → The worker keeps only one fifth of the extra earnings → A high combined withdrawal rate can weaken incentives and contribute to a poverty trap

    Try a topic test

    Choose Easy, Normal or Difficult. Save your answers and open worked review after finishing.

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    From guided practice to a new situation

    Write your answer and reasoning first. Use a hint only if you are stuck. The model solution is for self-checking; your written work is not automatically marked.

    1 · Guided

    A worker earns $100 more. A means-tested benefit falls by $60 and tax rises by $20. Calculate the change in disposable income and explain the incentive issue.

    Give me a hint

    Subtract both withdrawals from the extra gross wage.

    Compare my reasoning
    1. Disposable-income gain = $100 − $60 − $20 = $20
    2. The worker keeps only one fifth of the extra earnings
    3. A high combined withdrawal rate can weaken incentives and contribute to a poverty trap

    Disposable-income gain = $100 − $60 − $20 = $20 The worker keeps only one fifth of the extra earnings A high combined withdrawal rate can weaken incentives and contribute to a poverty trap

    Look for these in your work

    • Disposable-income gain = $100 − $60 − $20 = $20
    • The worker keeps only one fifth of the extra earnings
    • A high combined withdrawal rate can weaken incentives and contribute to a poverty trap
    2 · Independent

    Two households receive equal cash income, but one faces substantially higher disability-related costs. Explain why equal income does not settle whether the result is equitable.

    Give me a hint

    Separate sameness of the transfer from differences in need and usable resources.

    Compare my reasoning
    1. The cash outcome is equal
    2. The households have different needs and costs
    3. Equity depends on a fairness judgement about the resources each can actually use

    The cash outcome is equal The households have different needs and costs Equity depends on a fairness judgement about the resources each can actually use

    Look for these in your work

    • The cash outcome is equal
    • The households have different needs and costs
    • Equity depends on a fairness judgement about the resources each can actually use
    3 · Transfer

    A country defines relative poverty as income below 60% of its median. If median income rises while one household’s income is unchanged, explain how its relative-poverty status may change.

    Give me a hint

    Compare the fixed household income with a threshold tied to the median.

    Compare my reasoning
    1. The threshold rises with median income
    2. The household’s income stays fixed
    3. It can fall below the relative line even if its real income did not decline

    The threshold rises with median income The household’s income stays fixed It can fall below the relative line even if its real income did not decline

    Look for these in your work

    • The threshold rises with median income
    • The household’s income stays fixed
    • It can fall below the relative line even if its real income did not decline
    4 · Transfer

    Compare one strength and one limitation of universal benefits with means-tested benefits.

    Give me a hint

    Consider who receives support, targeting and administration.

    Compare my reasoning
    1. Universal benefits can avoid an income-eligibility cliff and reach people who do not claim means-tested support
    2. They cost more if paid broadly
    3. Means tests target limited funds but can create stigma, non-take-up and high withdrawal rates

    Universal benefits can avoid an income-eligibility cliff and reach people who do not claim means-tested support They cost more if paid broadly Means tests target limited funds but can create stigma, non-take-up and high withdrawal rates

    Look for these in your work

    • Universal benefits can avoid an income-eligibility cliff and reach people who do not claim means-tested support
    • They cost more if paid broadly
    • Means tests target limited funds but can create stigma, non-take-up and high withdrawal rates

    Common mistakes

    • Treating equality and equity as synonyms or assuming redistribution has one inevitable effect on efficiency.
    Recall without your notes

    What can you explain now?

    What makes relative poverty different from absolute poverty?

    Compare with the explanation

    It compares resources with living standards typical in a society

    A relative threshold moves with a reference such as median income.

    After trying it yourself, choose your next review. This is your self-assessment.

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    Make it stick

    Before moving on, explain the central idea in equity, poverty and redistribution and state one condition that could change its effect.

    If you needed the solution, close it and solve the problem again from a blank page. A correct answer is stronger when you can explain the reason for each step.

    Keep learning Economics

    Course scope and assessment

    Fifty-nine original lessons map all 53 Cambridge International AS & A Level Economics 9708 sections: all 29 AS sections (1.1–6.5) and all 24 A Level sections (7.1–11.6), covering all 253 numbered syllabus objectives. Six complex sections are split across lessons to give their objectives room for teaching and practice. Each mapped lesson includes original explanations, a worked example, concept checks and guided, independent and transfer/application practice with worked steps and answers. Topic coverage is complete for the listed syllabus versions, but this is not full-paper preparation. Practice is self-checked, not Cambridge-marked; extended-response grade evidence, cumulative timed-paper practice and human subject-teacher review remain outstanding.

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