The equity goal   Income distribution   Measurement  Lorenz curve  Gini coefficient   Absolute v relative poverty   Henderson poverty line   Equity v  efficiency  Cost v benefits of inequality

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1 Introductory concepts 2  Market mechanism  3 Elasticities  4 Market structures 5  Market failures  6  Macro economic activity/eco growth  7 Inflation 8  Employment & unemployment  9  External Stability  10  Income distribution 11.Factors affecting economy  12  Fiscal/Budgetary policy  13  Monetary Policy   14 Aggregate Supply Policies  15 The Policy Mix

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Absolute vs relative poverty

In general terms, poverty refers to people living in a situation where they have insufficient means to adequately provide for themselves.  However, given the many different ways that we can define ‘adequate,’ there are many alternative ways that poverty has been defined.  Some definitions rely on the word ‘poor’ to define people living in poverty.  However, defining poor can then become a problematic exercise.  Is someone poor if they are unable to purchase soft drinks and instead need to rely on water?  Is someone poor if they can only afford to buy a very old car as opposed to a newer one?  In recognition of these difficulties, experts have arrived at two main ways of defining poverty.

Absolute poverty occurs when a person or a household has insufficient income to purchase the basic necessities such as food, clothing and shelter.  Relative poverty occurs when a person or a household has a low level of income compared to other individuals or households in society or compared to a generally agreed standard.

Absolute poverty is clearly the most insidious form of poverty and the Federal Government is committed to reducing the number of persons or households living in absolute poverty.  As there is little disagreement about the need to reduce absolute poverty, welfare groups and private charities have maintained a strong focus on relative poverty over many years.

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