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ECO-2-CHAPTER-2

The document discusses poverty, highlighting the differences between absolute and relative poverty, and the complexities involved in measuring and understanding it. It outlines various factors contributing to poverty, the concept of the poverty trap, and methods for alleviating poverty, including government support and cash transfers. Additionally, it introduces the Lorenz Curve as a tool for analyzing income distribution and poverty incidence.

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Nicole Ann Molina
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10 views27 pages

ECO-2-CHAPTER-2

The document discusses poverty, highlighting the differences between absolute and relative poverty, and the complexities involved in measuring and understanding it. It outlines various factors contributing to poverty, the concept of the poverty trap, and methods for alleviating poverty, including government support and cash transfers. Additionally, it introduces the Lorenz Curve as a tool for analyzing income distribution and poverty incidence.

Uploaded by

Nicole Ann Molina
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd
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_A_I__

FAMILY
__O_O__
ECONOMY
___E_T_
POVERTY
POVERTY &
INEQUALITY
CHAPTER 2
Learning Objectives
After studying this section, the student should be ready to:

• differentiate absolute and relative poverty or inequality,


• discuss global poverty and inequality,
• understand poverty measures, issues, and variables;
• solve poverty incidence and the Lorenz Curve;
• examine poverty trap and the various effects of work combinations and government
support;
• evaluate on ways how to alleviate poverty;
• critique world targets toward poverty alleviation and eradication;
• create a short documentary on economic poverty;
• develop steps on how to eradicate poverty; and
• understand some poverty eradication measures at work.
Poverty
Poverty is a complex, multifaceted world that requires a clear analysis in all of
its many dimensions Among the dimensions referred to in this theory are the
geographical, biological, and social factors that must be taken into
consideration to fully understand poverty, not just by determining the poverty
line that separates those who are above and below it.
ABSOLUTE
AND
RELATIVE
POVERTY
ABSOLUTE AND RELATIVE
POVERTY

Absolute Poverty -
Relative poverty or
levels of incomes and
sometimes called
expenditures that fall
inequality - is the
below a level popularly
comparison of the
known as the "poverty
incomes and
line," nominal value of
expenditures of the poor
which is adjusted to hold
with reference to the rich
a fixed value of its
or of some other groups.
purchasing power.
1. Uneducated people
REASONS 2. The government is not able to

OF supply the basic needs of its citizen.


(education, health services and food
POVERTY security).
3. Natural disaster.
Is global
poverty still
possible to
eradicate?
MEASURING
POVERTY
MEASURING POVERTY

 POVERTY RATE - The most common measure of poverty . This is relative to poverty line.

POVERTY LINE - is set by the government as the threshold to which the absolute value of
income and expenses is compared to consider a family to be in poverty. The proportion of the
population that is below the poverty line is called the poverty rate.
 SUBSISTENCE INCIDENCE - the part below the poverty line suffering from extreme hunger.
TWO TYPES OF INEQUALITY

Wealth
inequality - is the Income
uneven distribution inequality -is
of accumulated income distributed
assets after in an uneven
deducting the manner
liabilities,
THE LORENZ
CURVE
The Lorenz Curve was developed by
American economist Max O. Lorenz in
1905 in his undergraduate essay and
doctoral paper in "Economic Theory of
Railroad Rates." It is a curve showing
the relationship between the population
in percentile ranking and the national
income
Figure 1. Poverty Incidence (%)
Among Basic Sectors, CAR: 2015
& 2018
POVERTY TRAP
Poverty Trap
The existence of the poverty trap is seen to be inevitable where there is a system of means-
tested social security benefits, the situation where a slight increase earnings leads to an
individual or family being worse off overall as a consequence of losing entitlement to other
benefits (Poverty Trap, 2006).​

While governments and NGOs are working hand-in-hand in solving this issue, programs in
place are deemed ineffective at reducing poverty at its very core.​
Earnings at Different Combinations of Work
and Government Support
(An Example)​
Work Earnings​ Governme Total
(Hours)​ nt Support​ Earnings​

0​ ₱ 0​ ₱ 120,000​ ₱ 120,000​
500​ ₱ 25,000​ ₱ 95,000​ ₱ 120,000​
1,000​ ₱ 50,000​ ₱ 70,000​ ₱ 120,000​
1,500​ ₱ 75,000​ ₱ 45,000​ ₱ 120,000​
2,000​ ₱ 100,000​ ₱ 20,000​ ₱ 120,000​
2,500​ ₱ 125,000​ ₱ 0​ ₱ 125,000​
combinations of work and
Government support reduced
at 50% for every peso earned
Work (Hours)​ Earnings​ Government Su Total Earnings​
pport​

0​ ₱ 0​ ₱ 120,000​ ₱ 120,000​
500​ ₱ 25,000​ ₱ 107,500​ ₱ 132,500​
1,000​ ₱ 50,000​ ₱ 95,000​ ₱ 145,000​
1,500​ ₱ 75,000​ ₱ 82,500 ₱ 157,500​
2,000​ ₱ 100,000​ ₱ 70,000​ ₱ 170,000​
2,500​ ₱ 125,000​ ₱57,500 ​ ₱ 182,500
POVERTY REDUCTION

Cash In-Kind Work


Transfers. Transfers. incentives

Sustainabl
Minimum Adjust Tax e
Wage Law Code Developm
ent Goals.

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