Define absolute poverty.

Absolute poverty is a situation in which a household cannot afford the basic necessities of life such as food, clean water, shelter, clothing and health care.

Define relative poverty.

Relative poverty is having an income so far below the average of the society a household lives in that it cannot take part in the normal life of that community.

Why can a country almost eliminate absolute poverty and still have widespread relative poverty?

Growth can lift everyone above subsistence while incomes at the bottom remain far below the median, so those households are still excluded from ordinary living standards.

What happens to measured relative poverty if every household's income doubles?

It does not change, because the median doubles as well and each household's position relative to the poverty line is unchanged.

Edexcel A-Level Economics B 9EB0

Scarcity, Choice and Potential Conflicts

Topic overview Scarcity and the economic problem Choice, trade-offs and opportunity cost Profit maximisation, sales maximisation and satisficing Survival, market share and other business objectives Stakeholders and their objectives Stakeholder conflicts and corporate social responsibility

Enterprise, Business and the Economy

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Introducing the Market

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Inequality and Re-Distribution

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Competition and Market Power

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Inequality and Re-Distribution

Absolute and relative poverty and how they are measured

3 things to know
Papers 2 and 3

Overview

Absolute and relative poverty, how relative poverty behaves when incomes change, the national relative low income threshold and equivalised income, absolute low income in the UK, the international extreme poverty line and purchasing power parity, the Multidimensional Poverty Index and Human Development Index, calculating a poverty threshold, survey understatement, and persistent poverty.

What you need to know

Answer each one before you reveal it.

Your recallNot started

Key term

In a recession, median income falls faster than the incomes of the poorest households. What happens to measured relative poverty, and why is that misleading?

Key term

State the usual national definition of a household in relative low income.

Key term

How is absolute low income measured in the UK?

Questions from this subtopic

Each one with the model answer underneath.

1
Define absolute poverty.
Model answer
Absolute poverty is a situation in which a household cannot afford the basic necessities of life such as food, clean water, shelter, clothing and health care.
2
Define relative poverty.
Model answer
Relative poverty is having an income so far below the average of the society a household lives in that it cannot take part in the normal life of that community.
3
Why can a country almost eliminate absolute poverty and still have widespread relative poverty?
Model answer
Growth can lift everyone above subsistence while incomes at the bottom remain far below the median, so those households are still excluded from ordinary living standards.
4
What happens to measured relative poverty if every household's income doubles?
Model answer
It does not change, because the median doubles as well and each household's position relative to the poverty line is unchanged.
5
In a recession, median income falls faster than the incomes of the poorest households. What happens to measured relative poverty, and why is that misleading?
Model answer
Measured relative poverty falls because the poverty line moves down with the median, even though the poorest households are no better off in real terms.
6
State the usual national definition of a household in relative low income.
Model answer
A household whose equivalised disposable income is below 60% of the contemporary median household income.

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