Economic Development · 2 question types
Past paper frequency (2018 to 2024)
This topic accounts for approximately 5% of your exam marks.
New emphasis in the 2027 syllabus; absolute and relative poverty, its causes and policies to alleviate it are now examined as a distinct topic. Guidance based on specimen materials.
Poverty is a lack of the income and resources needed to enjoy an acceptable standard of living. Economists distinguish two kinds, and the difference between them is a favourite exam definition.
Absolute poverty is a situation in which people cannot afford the minimum essentials needed to stay alive and healthy, such as food, clean drinking water, shelter, basic clothing and access to healthcare.
The level of income needed to buy these essentials is roughly the same everywhere, so absolute poverty is measured against a fixed line. The World Bank's widely cited line is about $2.15 a day (at 2017 purchasing-power-parity prices), updated from time to time. Anyone living below it is in absolute poverty. Absolute poverty is far more common in developing countries, where a large share of the population may live below the line.
is when a household's income is below a chosen proportion of the average (usually the median) income in its own country.
A common threshold is less than 60% of median household income. Because the threshold rises as a country gets richer, relative poverty measures inequality rather than survival: a household counted as relatively poor in a high-income country might still be above the global absolute-poverty line. Relative poverty is the main measure used in developed countries, where almost no one is in absolute poverty but income gaps still cause hardship.
Difference between absolute and relative poverty (2 marks)
What comes up: a 2-mark "Identify/Explain the difference between absolute poverty and relative poverty."
Write (two marks): (1) Absolute poverty is being unable to afford the basic necessities needed to survive, such as food, water and shelter (1). (2) Relative poverty is having an income below a set proportion of the average income in that country, so it is judged against others rather than against survival (1).
Watch out: do not define both as "being poor". The mark is for the contrast: absolute is measured against a fixed minimum standard of living, relative is measured against the rest of society.