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Bus1103 unit 6 Learning Journal

Microeconomics (University of the People)

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Bus1103 unit 6 Learning Journal

Refer to the Unit 6 Learning Journal Poverty Trap Tables spreadsheet to complete the
assignment.
Susan is a single mother with three children. She is a cashier at a food market earning $7.75 per
hour and works up to 2,000 hours per year. She is eligible for government benefits, so if she does
not earn any income, she will receive a total of $17,050 per year. She can work and still receive
government benefits, but for every $1 of income, her government stipend is $1 less.
The government has decided to change the benefits policy of every $1 of income earned to
reduce the government’s stipend by 60 cents. How will this change Susan's benefits received?
What are her new choices? Complete the Revised Poverty Trap Table to present Susan’s options
and provide answers to the following:
● What are the advantages of Susan working?
● What are the disadvantages of Susan working?
● What are the advantages of Susan receiving government benefits?
● What are the disadvantages of Susan receiving government benefits?
● Based on your findings from the Poverty Trap Table, should Susan continue to work
or only receive government benefits? Why or why not?
● Based on your findings from the Revised Poverty Trap Table, should Susan continue
to work or only receive government benefits? Why or why not?
● What are your recommendations for Susan to progress from the poverty trap?

If the government changes the benefits policy of every $1 of income earned to reduce the
government’s stipend by 60 cents, Susan’s benefits would increase by $1200 (17,050 + 2,000 x
0.60). Her new choices are 2000 hours of leisure for $18,250 and 2000 hours of work for
$15,500.

The advantages of Susan working are that even if the government reduces or seizes the benefits,
she would still have something to fall back on. Therefore working gives her some form of
stability and security. Also, working gives a sense of identity as well as an intellectual challenge.
It is beneficial to her mental health to spend time with people within her age group to share ideas
and learn new things. Susan gets the benefit of upgrading her skills and learning new ones
timeously. Working women are generally believed to have self-confidence and independence.

The disadvantages of Susan working are that she would incur extra expenses. She would spend
more money on transport and work clothes. She would also have to consider committing her kids
to the nursery or childcare. She would miss out on seeing her children grow, and she would not
have much time to spend with her kids as she would be most probably too tired when she knocks

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off from work.

The advantages of Susan receiving government benefits are that she would be able to provide for
her children’s basic human needs. Her children get to have a healthy lifestyle whether their
mother is working or not. Government benefits give Susan the flexibility of working or caring
for her children on a full-time basis.

The disadvantages of Susan receiving government benefits are that she might not have an
incentive to work. Government benefits hinder self-reliance and cause dependence. Receiving
government benefits would also make Susan economically inefficient.

Based on my findings from the poverty trap table, Susan has no incentive to work. She should
spend time looking after her children because whether she works or not, she still receives the
same amount. Staying home to look after her children would benefit the children as well as cut
the costs she would otherwise incur on childcare, transport and the like. Working does not
provide her with any financial gain.

Based on the revised poverty trap table, Susan should continue to work because the more she
works, the more money she would receive. She has an incentive to work. Working would provide
more financial gain for her.

I would recommend that Susan consider investing in online learning in order to acquire
education and new skills. She could also cut cost by doing some backyard vegetable gardening,
as well as save and start a small business. These may seem small, but they can help her progress
from the poverty trap.

References

1. Chen, J. (2020). Economics: Poverty Trap. Retrieved from

https://www.investopedia.com/terms/p/poverty-trap.asp

2. Greenlaw, S. A. & Shapiro, D. (2018). Principles of microeconomics, 2e. Open Stax Rice
University. Retrieved from https://d3bxy9euw4e147.cloudfront.net/oscms-
prodcms/media/documents/Microeconomics2e-OP.pdf

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