Absolute Poverty: Absolute poverty is characterized by the inability to meet essential human needs such as food, water, shelter, clothing, and healthcare due to insufficient income or consumption. This concept signifies the minimum level of resources required for survival. It is more prevalent in underdeveloped and developing economies.
Relative Poverty: Relative poverty is a gauge of inequality within a society, determined by living below a specific percentage of the median income. For instance, if households earn 50% less than the average household income, they fall into the category of relative poverty. In this scenario, individuals may have some income, but it is insufficient to afford the average basic consumption level of the region. It is more related to developed economies.
Differences between Absolute Poverty and Relative Poverty
| Features | Absolute poverty | Relative poverty |
|---|---|---|
| Definition | Inability to afford basic human necessities | Living below a certain percentage of the median income of a society |
| Prevalence | More common in developing countries | More common in developed countries |
| Focus | Meeting basic needs | Reducing inequality |
| Measurement | It can be determined using the Poverty line. | It can be determined using the Lorenz Curve and Gini Coefficient. |
Important concepts
Per Capita Income: It is the average income which is calculated by dividing total income by the population of the region under consideration.
Median Income: It is the income level of the middle level individual or household after arranging the income levels in increasing or decreasing order.
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