Lecture 3

Question 1

Poverty

Answer 1

when apreson’s resources are not sufficient to meet their minimum needs

Question 2

Why is poverty a concern of the gov

Answer 2

-moral obligarion to protect most vuleravbel in society, redistribute resources
-provide social insurance and protection so people dont reach that sgate (increase social welfare)

Other reasons: all market failres
externalities - desise, crime,
individual failures
failures in the insurance market - it can be difficult to break out of poverty because poverty reduces cognitive capacity/ people don’t save enough, don’t think about the future, etc..,doesnt save enoght and live longer after retirement,

Question 3

causes and conseq of poverty

Answer 3

-the state being in poverty itself makes people take worse optimising decisions- less likely to get out of the state of poverty
-poverty reduces cognatice capabilities becuase poverty-related concerns consume mental resource, leaving less for other tasks
-the gov can intervene to help people get out of the state- so they can make better choices