A situation where individuals cannot afford to acquire the basic necessities foe a healthy & safe existence.
In 2022, the world bank defined absolute poverty as anyone living on less that $1.90 a day.
It is more prevalent in developing countries than developed ones.
What is relative poverty?
A situation where household income is a certain percentage less than the median household income in the economy.
The UK defines absolute poverty as households that are living with less than 60% of the median household income.
Relative poverty is the main form of poverty that occurs in developed countries.
What are the causes of changes in poverty?
Absolute poverty can decrease even while income inequality increases.
This means that the income of wealthier households is rising faster than the income of the poorer households.
A reduction in absolute & relative poverty requires the benefits of both the workings of the free market & government intervention.
What are the causes of changes in absolute poverty?
There is a strong correlation between economic growth & a decrease in absolute poverty.
Government tax and benefit policies can support the most vulnerable groups in society.
What are the causes in changes in relative poverty?
Rising asset prices can decrease relative poverty in households which own their own properties.
Trade liberalisation increases potential market size & output in an economy. This leads to an increase in the demand for labour & a wage rise. This creates additional income which has a multiplier effect & pulls households out of relative poverty.
Decreased levels of government benefits can lower household income & increase relative poverty.
