5.2 Poverty
- IGCSE Economics
- Syllabus ref 5.2.1 to 5.2.3
Speaker notes: This deck covers the definitions of poverty, its causes, and policies to reduce it. We will use examples and diagrams to make the ideas concrete.
Learning objectives
- Define absolute and relative poverty.
- Explain the main causes of poverty.
- Describe policies to alleviate poverty.
- Explain how income can be redistributed.
Speaker notes: Read the objectives aloud. Tell students these match syllabus points 5.2.1, 5.2.2 and 5.2.3.
Starter: Two families, one country
- Family A has food, clean water and a home.
- Family B has the same but no phone or internet.
- Which family is poor? Discuss with a partner.
Speaker notes: Give students one minute to discuss in pairs. Use their answers to introduce the difference between absolute and relative poverty.
Absolute poverty
- Income is below a fixed minimum needed for basic needs.
- Basic needs: food, clean water, shelter and healthcare.
- The same poverty line is used for all countries.
- The line does not rise when average incomes rise.
Speaker notes: Stress that absolute poverty is about survival. Ask why a fixed line helps us compare poverty between countries.
Relative poverty
- Income is below a share of the country's median income.
- It measures inequality within one society.
- The line rises as average incomes rise.
- Someone can be relatively poor but not absolutely poor.
Speaker notes: Contrast this with the previous slide. Relative poverty is about comparison with others in the same country. Link back to the starter discussion.
Causes of poverty: economic factors
- Unemployment and low-paid, insecure work.
- Low levels of education and skills.
- Unequal distribution of income and wealth.
- High inflation cutting real incomes.
Speaker notes: Ask students to rank these causes and justify their order. Point out that the causes often overlap and reinforce each other.
Causes of poverty: social and political factors
- Poor health and limited access to healthcare.
- Discrimination by gender, ethnicity or disability.
- Conflict, corruption and weak government.
- Natural disasters and climate change.
Speaker notes: Explain that poverty is not only economic. Social and political factors can trap people in poverty. Ask for fictional examples from an imaginary country.
Policies: education and healthcare
- Free or subsidised education and training.
- Better skills raise future earning power.
- Healthcare improves health and productivity.
- Subsidies lower the price paid by poor households.
Diagram explained
The axes show the quantity and price of basic goods. A subsidy shifts the supply curve down, so the price paid by consumers falls and the quantity bought rises. The vertical gap between the two supply curves shows the cost of the subsidy to the government.
- Start at the original equilibrium price and quantity.
- A subsidy shifts supply down to the right.
- Consumers pay a lower price and buy more.
- The gap between the curves is the subsidy cost.
Speaker notes: These policies attack the causes of poverty. Explain that a subsidy shifts supply down, lowering the price consumers pay. The diagram shows this effect.
Policies: progressive taxes and benefits
- Progressive taxes take a larger share from high incomes.
- Tax revenue funds benefits for low-income households.
- Transfer payments raise the incomes of the poor.
- This redistributes income and reduces relative poverty.
Speaker notes: Explain briefly how a progressive tax differs from a regressive tax. Ask students how benefits might affect the incentive to work.
Policies: minimum wage
- A minimum wage sets a legal floor for pay.
- It raises the income of low-paid workers.
- If set above equilibrium, it can cause unemployment.
Diagram explained
The axes show the quantity of labour and the wage rate. A minimum wage is set above the equilibrium wage, so the wage rises. At this higher wage, the quantity of labour supplied is greater than the quantity demanded, creating a surplus of workers, which is unemployment.
- Find the equilibrium wage and quantity of labour.
- The government sets a minimum wage above it.
- The higher wage attracts more workers.
- Fewer workers are hired, so a surplus appears.
Speaker notes: Draw attention to the diagram. Ask students to explain why a minimum wage set above equilibrium creates a surplus of labour.
Policies: maximum prices
- A maximum price caps the price of essentials.
- It aims to keep food and fuel affordable.
- If set below equilibrium, it causes a shortage.
Diagram explained
The axes show the quantity and price of staple food. A maximum price is set below the equilibrium price, so the price falls. At this lower price, the quantity demanded is greater than the quantity supplied, creating a shortage.
- Find the equilibrium price of staple food.
- The government sets a maximum price below it.
- Consumers want to buy more at the lower price.
- Suppliers offer less, so a shortage appears.
Speaker notes: Use the diagram to show the shortage. Ask what a government could do to stop the shortage from getting worse.
Worked example: A minimum wage
- A fictional country sets a minimum wage above equilibrium.
- Step 1: identify the equilibrium wage.
- Step 2: mark the higher minimum wage.
- Step 3: quantity of labour supplied rises.
- Step 4: quantity demanded falls, so unemployment rises.
Speaker notes: Walk through the steps on the board. Ask students to state one benefit and one cost of this policy for low-income households.
Common mistakes and exam tips
- Do not confuse absolute and relative poverty.
- Relative poverty compares with median income, not a fixed line.
- Explain both benefits and drawbacks of policies.
- Use the words alleviate and redistribute correctly.
- Link each policy to a cause of poverty.
Speaker notes: Highlight that exam answers need explanation, not just a list. Remind students to use economic terms accurately and to apply them to the scenario given.
Key terms
- Absolute poverty: income below a fixed basic-needs line.
- Relative poverty: income below a share of median income.
- Progressive tax: higher earners pay a larger percentage.
- Transfer payment: a benefit paid to a household.
- Minimum wage: a legal floor on pay.
Speaker notes: Ask students to write one sentence using each term. Check that their definitions are precise and correctly applied.
Plenary: quick check
- Define absolute poverty in one sentence.
- Give two causes of poverty.
- Name one policy to redistribute income.
- What happens if a maximum price is set too low?
- What is one drawback of a minimum wage?
Speaker notes: Use these as quick oral questions. Target different students to check understanding across the whole class.
Summary
- Poverty has many causes, so policies must raise incomes and improve opportunities.
Speaker notes: End with the one-line summary. Remind students that absolute and relative poverty are measured differently and need different policy responses.