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Level: AS Levels, A Level, GCSE – Exam Boards: Edexcel, AQA, OCR, WJEC, IB, Eduqas – Economics Revision Notes 

Absolute Poverty

This is the minimum amount of resources a person needs to meet basic human needs such as food, clean water, shelter and clothing.

Relative Poverty

People are in relative poverty if they are living below a certain income threshold in a particular country. This is normally when someone earns well below the median level of income of a country. 

Problems with Relative Poverty

  • Relative poverty levels will be different in developed vs developing countries. This is because someone that is poor in the UK might not be poor in India.
  • It is highly subjective
  • It will change over time from country to country
  • Although it is used to make international comparisons it’s not deemed to be very accurate.

World Banks measure of Absolute Poverty

In 2015 the World Bank defined the international poverty line to be at $1.90 a day. It was previously set at $1.25 a day in 2005.

Other measures of Poverty

Human Poverty Index

This is a composite poverty index that is split into two indices. 

HPI – 1  

This is a measure of deprivation in the poorest countries of the world. The three main elements of this index are the following.

  1. The percentage of people not expected to survive until the age of 40.
  2. The percentage of people who are not literate.
  3. The percentage of the population who do not have access to clean water or healthcare.

HPI – 2  

This measure is used for developed countries around the world. 

  1. The probability at birth of not surviving to age 60.
  2. The number of adults who are illiterate.
  3. The percentage of the population below the income poverty line. (50% of the median household income of a country)
  4. The rate of long term unemployment.

What factors influence changes in Absolute and Relative Poverty?

  1. Education & training
  2. Wage rates
  3. Inheritance
  4. Ownership of assets e.g. property
  5. Distribution of income
  6. Access to basic public services
  7. State of the economy 
  8. Unemployment
  9. Social benefits
  10. Tax rates
  11. Pensions
  12. Countries debt


Quick Fire Quiz – Knowledge Check

1. Distinguish between ‘Absolute Poverty’ and ‘Relative Poverty’ (4 marks) 

2. Explain four problems with Relative Poverty (4 marks)

3. Identify what the World Banks defined the international poverty line to be (2 marks)

4. Identify and explain the differences between the two indices of HDI (8 marks)

5. Identify six factors which influence changes between Absolute and Relative Poverty (6 marks)


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