Studyledge

Living Standards, Poverty and Population: Question 8

Syllabus 5.2

Multiple choice 1 mark

In the country of Feslund, economists define the relative poverty line as any household income below 60% of the national median household income. This year, median household income in Feslund is $30,000. The Rosek family's household income this year is $16,000.

Using Feslund's relative poverty line, is the Rosek family living in relative poverty?

Choose an answer to check it, then compare with the worked solution below.
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Worked solution

Step 1: Work out Feslund’s relative poverty line

60% of the median household income: 0.60×30,000=18,0000.60 \times 30{,}000 = 18{,}000

So Feslund’s relative poverty line this year is $18,000.

Step 2: Compare the Rosek family’s income with the poverty line

The Rosek family’s household income is $16,000, which is below the $18,000 poverty line.

Since $16,000 is less than $18,000, the Rosek family is living in relative poverty under Feslund’s definition, option B\boxed{\text{option B}}.

Why the other options are wrong

  • A: compares the family’s income to half (50%) of the median rather than the 60% threshold Feslund actually uses; even so, $16,000 is still below the correct $18,000 threshold.
  • C: wrongly assumes relative poverty requires zero income; it is defined by comparison with the median or average income of the same society, not by having no income at all.
  • D: reaches the right conclusion for the wrong reason. Whether a household can afford basic necessities is the test for absolute poverty, not relative poverty, which depends only on the income comparison with the median.

Final answer

  • The Rosek family’s income ($16,000) is below Feslund’s relative poverty line of $18,000 (60% of the $30,000 median), so they are living in relative poverty, option B.