Poverty and Income Distribution

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Let's Think About Living Standards and
Opportunities

"Imagine you earn the minimum wage in your country. 300
BHD. The least you can pay for rent is 120 BHD.
Create a budget covering;
Rent
Food
Transportation
Healthcare
Leisure.
Can you afford everything?"

"What sacrifices did you make? How does this compare to
living in poverty?"

Warm-Up Discussion

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March 10, 2025

Poverty and Income

Distribution

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• I will be able to explain how economists

measure poverty and discuss the causes
of poverty

• I will be able to describe how

economists measure income inequality
and identify what antipoverty programs
are.

Main Idea: Poverty and unequal income distribution
highlight economic disparities, impacting individuals
and society, and require comprehensive solutions.

Lesson Objectives

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Prompt:Analyze the provided infographic on global
poverty trends. Focus on interpreting the data
presented in the graph to understand the changes in
the number of people living in extreme poverty and
the corresponding poverty rate over the years 1990
to 2015.

Question 1: The infographic highlights a significant
decrease in global poverty.

What potential factors might have contributed to this
reduction between 1990 and 2015, and how might
these factors be reflected in the data presented?

Discussion Activity

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Answer: Potential Factors:

Economic Growth: Increased economic development in many countries, particularly in Asia, likely created jobs and raised incomes.

Globalization: Expansion of trade and investment may have provided economic opportunities.

Poverty Reduction Programs: Government and international initiatives focused on poverty alleviation, such as microfinance, education, and healthcare access.

Technological Advancements: Improvements in agriculture, communication, and other
technologies could have boosted productivity and living standards.

Reflection in Data:
The consistent decline in the number of people living in poverty and the poverty rate indicates the effectiveness of these factors. The data doesn't explicitly state the causes, but the trend suggests a positive impact from the combined efforts. The steeper decline between 1999 and 2011 might reflect a period of more rapid economic growth or more effective poverty reduction strategies.

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Poverty is a condition where a person's income and resources are

insufficient to achieve a minimum standard of living. The poverty

threshold is a key concept indicating the minimum income needed

for basic living expenses. It serves as a benchmark for measuring

poverty rates.

What is Poverty?

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Measuring Poverty

Poverty Rate

●Percentage of households below
poverty threshold

●Based on total population
measurement

●More comprehensive than
employment statistics

Income Distribution

●Measured using the Lorenz Curve

●Graphically represents national
income inequality

●Shows income distribution across
population groups

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Measuring Poverty

Scenario 1: A rural community has 1,000 households. The poverty threshold is set at $5,000 annual income per household. A survey reveals the following income distribution among households:

• 300 households earn less than $3,000 annually.

• 200 households earn between $3,000 and $5,000 annually.

• The remaining 500 households earn above $5,000 annually.

Task:

1. Calculate the poverty rate in this community.

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Measuring Poverty

Scenario 2: In an urban area with 2,000 individuals, the poverty line is set at $10,000 annual income per person. A survey reveals:

• 400 individuals earn $6,000 annually.

• 300 individuals earn $8,000 annually.

• 55 of these individuals do not earn at all.

• The remaining individuals earn above $10,000 annually.

Task:

1. Calculate the poverty rate

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A Tool for Measuring Income Inequality

The Lorenz Curve is a powerful graphical tool that

illustrates income distribution in an economy. The

curve plots cumulative percentage of households

against their cumulative percentage of income. A

perfectly straight diagonal line represents

complete equality, where income is distributed

evenly. The actual Lorenz curve typically bows

below this line, with the gap between them

indicating the degree of income inequality - the

larger the gap, the greater the inequality.

Understanding the Lorenz Curve

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Factors Affecting Poverty: Education

●Higher education levels lead to increased
income potential

●Quality education opens better career
opportunities

●Skills development enhances
employability and earnings

Education and Income Relationship

●Education provides essential job market skills

●Better education access reduces income
inequality

●Educational opportunities create economic
mobility paths

Breaking the Poverty Cycle

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Factors Affecting Poverty: Discrimination

●Older workers face reduced job
opportunities

●Limited career advancement
and training access

●Lower wages despite valuable
experience

Age Discrimination

●Persistent gender pay gap
across industries

●Limited access to leadership
positions

●Barriers in male-dominated
career fields

Gender Discrimination

●Unequal hiring and promotion
practices

●Disparities in salary and benefits

●Reduced access to financial
resources

Racial Discrimination

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●Single-parent households face higher risk of poverty

●Changing family structures impact household income
stability

●Larger families often experience increased financial
strain

●Elderly households may have limited income sources

●Young adults struggle with entry-level wages

●Geographic location affects economic opportunities

Factors Affecting Poverty: Demographics

Open Ended

Explain TWO factors that affect poverty in an economy.

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Antipoverty Programs

●Provides monthly benefits for
purchasing food

●Based on household size and
income

●Helps ensure access to
nutritious meals

National Food Stamp
Program

●Provides healthcare
coverage for low-income
individuals

●Covers medical services
and prescriptions

●Joint federal and state
program

Medicaid Program

●Tax benefit for low-income
working families

●Credit amount varies by
income level

●Reduces tax burden and
provides refunds

Earned Income Tax
Credit

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Individual Activity

Complete the Google Form Assigned to you.