1. What is meant by poverty and what are the signs that there is poverty in the economy?

Poverty is described to be a condition wherein there are inadequate resources to supply

the basic needs of certain individuals in their daily lives. Specifically, there is a lack of financial
funds or income which leads to people being unable to access or provide basic necessities such
as food, shelter, clothing, education, and other needs for themselves or their family. Poverty
exists on all countries but differs in magnitude. It can lead to different social and economic
problems which affects the overall growth of a country. Signs that often portray the existence of
poverty in a certain economy include hunger and malnutrition, illnesses, high unemployment,
lack of education, homelessness, low wages, poor healthcare, high public debt and other such
factors.

2. How does absolute poverty differ from relative poverty?

Absolute poverty involves people who experience extreme and severe poverty in which
the income they receive is altogether spent on minimal basic necessities such as food, shelter,
and clothing. This type of poverty mostly entails not being able to supply the most fundamental
provisions for survival because household income is below a certain level. People experiencing
absolute poverty often find themselves not being able to maintain basic living standards such as
being unable to consume enough food to sustain a healthy body, not having clean clothing to
wear, and having no shelter to live in. On the other hand, relative poverty in the name itself,
suggests that it is poverty in relation to a certain standard. This type of poverty serves as a
comparative measure of poverty in which people associated with it are considered in
comparison to other people within the economy. Specifically, it refers to a person that has lower
income relative to the average income of the general population. It does not necessarily mean
that basic necessities are not met under relative poverty but only that people lack a minimum
amount of income and have a lower standard of living than the average member of society.

3. What are the main causes of poverty?

Main causes of poverty

1. Unemployment Poverty and unemployment are interrelated most
likely because there is a lack of financial provisions for
a good education leading to lack of skills and then
resulting to lost job opportunities.
2. Low Wages Low wages as a result of a high proportion of unskilled
workers in a country causes people in a lower
standard of living to have difficulty in providing for
basic needs.
3. Illness Illnesses because of poor healthcare services and
malnutrition reduces life expectancy which increases
the degree of poverty in a country.
4. Age The nature of a job sometimes requires a certain age
limit which makes it difficult for people who are no
longer qualified to provide for themselves.
5. Poor Healthcare Poor healthcare services makes it difficult for already
poor families to cope with the required medications

6. Low Literacy Rates
7. High Population Growth
8. Poor Infrastructure
9. Low Foreign Direct Investment
10. High Public Debt
11. Reliance on Primary Sector Output
12. Corruption and Instability
needed to recover from illnesses.
Low literacy rates stems from the lack of education
that impacts employment and productivity.
Poor countries due to lack of education and family
planning tend to have high population which forces
the already limited resources to be further divided.
Poor infrastructures affect the productivity and flow
of the economy through transportation and
communication networks.
Poor countries will likely not be subjected to the
interest of foreign investors because of the lack of
opportunities and returns as well as high risks.
Countries with high public debts will usually have to
pay the principal plus the interest of the debt and the
funds needed to further the growth of the country will
instead be used to pay the interests.
Instead of focusing only on the primary sector for
export, countries must also be competitive in other
sectors that bring in more profit.
The funds for development that could help alleviate
poverty are being unequally allocated and are
subjected to fraud by some officials which prevent the
poor from benefitting.

4. Why does an overreliance on primary sector output hinder the growth of low-income countries?

The usual behavior is to rely on the primary sector because that is the traditional way
known by countries to survive. Yet, times have changed and countries need to adjust to the fast-
paced world we now live in. If low-income countries continue to rely heavily on primary sector
outputs for income despite of its low profit margin, then they will surely be left behind because
while low-income countries don’t go out of their comfort zones, other countries are taking
advantage of the market and earning more. Opportunity costs should be considered where the
best possible decisions should be made by a country to maximize returns and productivity. This
entails improving the different sectors of economy so that they are able to compete with other
countries and increase GDP.