🛒principles of microeconomics review

key term - Poverty Line

Definition

The poverty line is a threshold income level below which an individual or household is considered to be living in poverty. It is used to identify and measure the extent of poverty within a population, and to determine eligibility for various social welfare programs and benefits.

5 Must Know Facts For Your Next Test

  1. The poverty line is typically set at a level that represents the minimum income required to meet basic needs, such as food, shelter, and clothing.
  2. The poverty line is often adjusted for factors such as cost of living, household size, and geographic location to ensure it accurately reflects the local context.
  3. Governments and international organizations use the poverty line to measure the extent of poverty and to target resources and policies to those in need.
  4. The poverty line is a critical tool for understanding the distribution of income and wealth within a society and for evaluating the effectiveness of social welfare programs.
  5. The determination of the poverty line is a complex and often controversial process, as it involves subjective judgments about the minimum standard of living and the basic needs of individuals and households.

Review Questions

  • Explain the purpose of the poverty line and how it is used to identify and measure poverty.
    • The poverty line is a threshold income level that is used to determine whether an individual or household is living in poverty. It is used to identify the extent of poverty within a population and to target resources and policies to those in need. The poverty line is typically set at a level that represents the minimum income required to meet basic needs, such as food, shelter, and clothing. Governments and international organizations use the poverty line to measure the distribution of income and wealth within a society and to evaluate the effectiveness of social welfare programs.
  • Describe the differences between absolute and relative poverty and how they are reflected in the determination of the poverty line.
    • Absolute poverty refers to a condition characterized by severe deprivation of basic human needs, while relative poverty is a condition where an individual's or household's resources are so far below the average in a country or community that they are effectively excluded from ordinary living patterns and activities. The determination of the poverty line can reflect both absolute and relative measures of poverty. An absolute poverty line is typically set at a level that represents the minimum income required to meet basic needs, regardless of the average income in a society. A relative poverty line, on the other hand, is typically set as a percentage of the median or average income in a society, reflecting the idea that poverty is a relative concept that depends on the overall distribution of resources within a community.
  • Analyze the role of the poverty line in the design and implementation of social welfare programs, and discuss the potential challenges and limitations of using the poverty line as a policy tool.
    • The poverty line is a critical tool for targeting resources and policies to those in need, as it is used to determine eligibility for various social welfare programs and benefits. However, the determination of the poverty line is a complex and often controversial process, as it involves subjective judgments about the minimum standard of living and the basic needs of individuals and households. Additionally, the poverty line may not fully capture the multidimensional nature of poverty, which can include factors such as access to education, healthcare, and other essential services. Furthermore, the use of the poverty line as a policy tool can have unintended consequences, such as creating disincentives for individuals to increase their incomes or discouraging participation in social welfare programs. As such, policymakers must carefully consider the limitations and potential drawbacks of using the poverty line as a tool for addressing poverty and designing effective social welfare programs.