Poverty

Question 1

What is absolute poverty?

Answer 1

When individuals are unable to consume sufficient necessities to maintain life. An income insufficient to allow a basic standard of living (e.g.really limited access to water and food)

Question 2

What is relative poverty?

Answer 2

Occurs when income is below a specified proportion of average income - e.g. below 60% of median income

Question 3

What are some of the causes of poverty?

Answer 3

• natural disasters
• inflation
• regressive taxes
• illness or disabilities
• discrimination
• household composition (e.g single parent with 5 children, compared to 2 parents with 1 or 2 children)
• poverty trap
• dependence
• generational poverty

Question 4

Why might a country have high levels of poverty?

Answer 4

• lack of human capital (education and training)
• health problems
• disproportionate number of people not having jobs
• gov policy - how does it redistribute incomes through taxation
• competitive nature and product markets
• the amount of physical capital (like paved roads, schools, research facilities, airports, etc)

Question 5

What are some of the effects of poverty?

Answer 5

• according to the anti-poverty pressure group (CPAG), poverty damages childhoods, life chance and eventually all in society
• impacts on physical and mental health
• increased crime (opportunity cost of policing)
• there are direct costs to the gov, as well as reduced tax receipts and indirect costs

Question 6

What are some of the economic effects of poverty?

Answer 6

• direct costs to gov, as well as reduced tax receipts and indirect costs
• if less people unemployed —> lower output —> lower profits —> economic growth falls
• increased crimes means more spending from the gov to enforce this