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Chapter 15: Q. 14 (page 377)

How is the poverty rate calculated?

Short Answer

Expert verified

A country's poverty rate is estimated as the percentage of its people living below the poverty line set by the government.

Step by step solution

01

Concept Introduction

Poverty refers to a situation in which a portion of a country's population lives below the 'Poverty Line,' which is the minimum level of income required to maintain the country's basic standard of living.

02

Explanation

The amount of money needed to meet basic necessities is determined at a given level. The poverty line is the income threshold at which a person is considered poor. The ratio of the people below this line to the total population is used to calculate a country's poverty rate.

Mathematically it is given as:

Povertyrate=PeoplelivingbelowthepovertylineTotalpopulation×100

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Most popular questions from this chapter

In country B, the population is 900 million and 100 million people are living below the poverty line. What is the poverty rate?

We have discovered that the welfare system discourages recipients from working because the more income they earn, the less welfare benefits they receive. How does the earned income tax credit attempt to loosen the poverty trap?

How has the inequality of income changed in the U.S. economy since the late 1970s?

Jonathon is a single father with one child. He can work as a server for \(6 per hour for up to 1,500 hours per year. He is eligible for welfare, and so if he does not earn any income, he will receive a total of \)10,000 per year. He can work and still receive government benefits, but for every \(1 of income, his welfare stipend is \)1 less. Create a table similar to Table 15.4 that shows Jonathan’s options. Use four columns, the first showing number of hours to work, the second showing his earnings from work, the third showing the government benefits he will receive, and the fourth column showing his total income (earnings + government support). Sketch a labor-leisure diagram of Jonathan’s opportunity set with and without government support.

Table 15.9 shows the share of income going to each quintile of the income distribution for the United Kingdom in 1979 and 1991. Use this data to calculate what the points on a Lorenz curve would be, and sketch the Lorenz curve.

How did inequality in the United Kingdom shift over this time period? How can you see the patterns in the quintiles

in the Lorenz curves?

Share of Income19791991
Top quintile39.70%42.90%
Fourth quintile24.80%22.70%
Middle quintile17.00%16.30%
Second quintile11.50%11.50%
Bottom quintile7.00%6.60%
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