Absolute and Relative Poverty Questions — Edexcel A-Level Economics

1. A country draws its relative poverty line at 60% of the median. Table 1 shows median household income and one household's income in two separate years.
From Table 1, that household was

Calculation

Table 1: Median household income and one household's income
	Year 1	Year 5
Median household income	£30,000	£34,000
The household's income	£17,400	£19,800

Select one answer

A In relative poverty in Year 1 only.

B In relative poverty in Year 5 only.

C In relative poverty in both years.

D In relative poverty in neither year.

Show model answer

Answer: C (In relative poverty in both years.). The line moves every year, because it is set against the median.
Year 1: 60% of £30,000 = £18,000. The household's £17,400 is below it, so it is in relative poverty.
Year 5: 60% of £34,000 = £20,400. The household's £19,800 is still below it, so it is in relative poverty again.
The household is £2,400 a year better off in cash terms and no further out of poverty, because the median rose by £4,000 while its own income rose by £2,400. Relative poverty measures the distance from the middle, not the level of income, so a household escapes it only by gaining on the median.

Why the other options are wrong

A — This compares the Year 5 income of £19,800 with the Year 1 line of £18,000. The relative line is not fixed: it is recalculated from the median every year, and by Year 5 it stands at £20,400.
B — The reverse slip — the Year 1 income of £17,400 is measured against the Year 5 line of £20,400. Each year's income must be compared with that same year's line.
D — A rise in income does not by itself lift a household out of relative poverty. This one gained £2,400 while the line rose by £2,400 as well, so its position relative to the middle is unchanged.

2. A cyclone destroys homes, farmland and the road network across a region of a low-income country. Over the following year, the most likely effect in that region is

Applied reasoning

Select one answer

A A fall in absolute poverty, as rebuilding creates work.

B A rise in absolute poverty, as livelihoods are destroyed.

C No change in absolute poverty, as emergency aid replaces losses.

D No change in absolute poverty, as it is measured in dollars.

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Answer: B (A rise in absolute poverty, as livelihoods are destroyed.). Absolute poverty exists where people cannot afford the basic necessities — food, water, shelter, healthcare. A natural disaster attacks exactly those things: it destroys the land and tools people earn from, and the roads that bring goods to them.
Households that were just above the threshold lose their means of earning and fall below it, so the number in absolute poverty rises. Natural disasters and conflict are the standard causes of a sharp increase in absolute poverty, and their effects last well beyond the event itself, because the destroyed capital takes years to replace.

Why the other options are wrong

A — Reconstruction does eventually create work, but it is funded out of resources the region has just lost, and it comes after the destruction rather than instead of it. Within a year the loss of homes, farmland and roads dominates.
C — This confuses a policy's intention with its effect. Emergency aid relieves the worst of the hardship; it does not restore the farmland, the housing stock and the transport network that generated incomes.
D — The absolute poverty line is set in dollars at a fixed international level, but what is measured against it is the household's own income. Destroying the sources of that income moves households below a line that has not moved at all.

3. The share of households consisting of a single pensioner living on a fixed state pension rises sharply, while median earnings across the economy continue to grow. Taken on its own, the most likely effect is that

Applied reasoning

Select one answer

A Absolute poverty falls, as pensioners draw on their savings.

B Absolute poverty rises, as the state pension is withdrawn.

C Relative poverty falls, as the state pension is guaranteed.

D Relative poverty rises, as more incomes fall behind the median.

Show model answer

Answer: D (Relative poverty rises, as more incomes fall behind the median.). Relative poverty is measured against a line that moves with median income. If median earnings keep growing while a growing group of households lives on a pension that does not, more and more of those households end up below 60% of the median.
Nothing here says pensioners are worse off in cash terms — their income is fixed, not falling. They are worse off relative to the middle, and that is what this measure captures. Demographic change of this kind is one of the standard causes of a rise in relative poverty even in a growing economy.

Why the other options are wrong

A — Savings are a stock of wealth, not income, and running them down is not a fall in poverty. Nothing in the question says pensioner households hold savings at all.
B — The pension is fixed, not withdrawn. A fixed income means unchanged purchasing power in cash terms, so there is no reason for the number unable to afford basic necessities to rise.
C — A guaranteed income protects a household against a fall in its own income. It gives no protection at all against the median rising faster, which is what the relative measure compares it with.

4. Unemployment in a country falls for three years running, but the number of households in relative poverty does not fall. The most likely explanation is that

Applied reasoning

Select one answer

A Median household income has fallen sharply.

B Much of the new work is part-time and low-paid.

C The absolute poverty line has been raised.

D Welfare payments have risen faster than wages.

Show model answer

Answer: B (Much of the new work is part-time and low-paid.). Having work and being out of relative poverty are not the same thing. If the jobs being created are part-time, insecure or low-paid, a household can move from unemployment into work and still sit below 60% of median income.
This is why the Edexcel material lists underemployment and low wages alongside unemployment as labour market causes of relative poverty. A falling unemployment rate counts people, not hours or pay, so it can improve while the income distribution does not.

Why the other options are wrong

A — A falling median would lower the poverty line, which on its own reduces the measured number below it. This gets the direction of the relative line backwards.
C — The absolute line and the relative line are separate measures. Moving the absolute threshold changes the count of people in absolute poverty and has no effect on a figure calculated from the median.
D — Welfare payments rising faster than wages would raise the incomes of the poorest households relative to the middle, which reduces relative poverty rather than holding it up.

5. Two countries measure absolute poverty against the World Bank's threshold of $2.15 a day and relative poverty against 60% of their own median household income. One country is high-income and the other low-income. It follows that

Definition in context

Select one answer

A Both thresholds are set at the same level in the two countries.

B Neither threshold can be compared between the two countries.

C The absolute threshold is the same in both, the relative one is not.

D The relative threshold is the same in both, the absolute one is not.

Show model answer

Answer: C (The absolute threshold is the same in both, the relative one is not.). The two measures are built differently. The absolute threshold is a fixed international figure — $2.15 a day — chosen to represent what survival costs, and it does not change from country to country.
The relative threshold is country-specific, because it is 60% of that country's own median household income. The high-income country's median is far above the low-income country's, so its relative line sits far higher in cash terms.
This is why a rich country can have almost no absolute poverty and a substantial rate of relative poverty at the same time.

Why the other options are wrong

A — Only one of them is. The relative threshold is calculated from each country's own median, so two countries with different medians have different relative lines by construction.
B — The absolute threshold exists precisely so that poverty can be compared internationally. It is the relative measure that resists comparison, because each country is being judged against itself.
D — This has the two measures the wrong way round. The fixed international figure is the absolute one; the relative one moves with each country's median.

6. Table 1 lists four changes in a low-income country over one year.
From Table 1, the change most likely to reduce absolute poverty is

Data interpretation

Table 1: Four changes over one year
	Change
Change 1	Foreign firms open factories employing 20,000 previously jobless workers
Change 2	Median household income rises while the poorest households' incomes are unchanged
Change 3	The relative poverty line is redefined as 50% of median household income
Change 4	The share of total income going to the richest tenth of households rises

Select one answer

A Change 1.

B Change 2.

C Change 3.

D Change 4.

Show model answer

Answer: A (Change 1.). Absolute poverty falls when households that could not afford basic necessities can now afford them. That needs the incomes of the poorest to rise.
Change 1 does exactly that: 20,000 households that had no earnings now have some. Foreign investment, trade and aid are the global factors the Edexcel material identifies as capable of reducing absolute poverty in a developing economy, and this is the mechanism — jobs and incomes reaching people who had neither.

Why the other options are wrong

B — A rising median with the poorest standing still changes the relative measure, not the absolute one. In fact this widens the gap: the relative line rises while the incomes at the bottom do not.
C — Redefining the line changes the count, not anyone's living standards. It also alters the relative measure, which is the one calculated from the median — the absolute threshold is a fixed international figure.
D — A larger share going to the richest tenth is a change in the distribution. It tells you nothing about whether the poorest can now afford necessities, and if anything the shares of everyone else have fallen.

4.2.1 Absolute and Relative Poverty — Practice Questions

1. A country draws its relative poverty line at 60% of the median. Table 1 shows median household income and one household's income in two separate years.
From Table 1, that household was

2. A cyclone destroys homes, farmland and the road network across a region of a low-income country. Over the following year, the most likely effect in that region is

3. The share of households consisting of a single pensioner living on a fixed state pension rises sharply, while median earnings across the economy continue to grow. Taken on its own, the most likely effect is that

4. Unemployment in a country falls for three years running, but the number of households in relative poverty does not fall. The most likely explanation is that

5. Two countries measure absolute poverty against the World Bank's threshold of $2.15 a day and relative poverty against 60% of their own median household income. One country is high-income and the other low-income. It follows that

6. Table 1 lists four changes in a low-income country over one year.
From Table 1, the change most likely to reduce absolute poverty is

Your score

1. A country draws its relative poverty line at 60% of the median. Table 1 shows median household income and one household's income in two separate years.From Table 1, that household was

2. A cyclone destroys homes, farmland and the road network across a region of a low-income country. Over the following year, the most likely effect in that region is

3. The share of households consisting of a single pensioner living on a fixed state pension rises sharply, while median earnings across the economy continue to grow. Taken on its own, the most likely effect is that

4. Unemployment in a country falls for three years running, but the number of households in relative poverty does not fall. The most likely explanation is that

5. Two countries measure absolute poverty against the World Bank's threshold of $2.15 a day and relative poverty against 60% of their own median household income. One country is high-income and the other low-income. It follows that

6. Table 1 lists four changes in a low-income country over one year.From Table 1, the change most likely to reduce absolute poverty is

Your score

1. A country draws its relative poverty line at 60% of the median. Table 1 shows median household income and one household's income in two separate years.
From Table 1, that household was

6. Table 1 lists four changes in a low-income country over one year.
From Table 1, the change most likely to reduce absolute poverty is