Monday, September 20, 2010

Wiki-Education: Poverty and Consumption

"In 2008, the “poorest” one fifth of Americans households spent on average $12,955 per person for goods and services (other than taxes), the second quintile spent $14,168, the third $16,255, the fourth $19,695, while the “richest” fifth spent $26,644."

I often feel that I waste money on unnecessary luxuries and am always seeking to use our funds more efficiently and would like to give a larger portion away. I just read the book "Radical" and a book on Mother Teresa. (Both really great books!!! ) They both emphasize efficient use of money, and moderate living. (Why when I concentrate on doing something my behavior often is contradictory?... I went to TJ Maxx this weekend and got a pair of leather boots, and in Barnes and Noble I succumbed to their buy 2 get 1 classic books... they are so cool!! ) That said, after tax we do not even take in $12,955 per person per year, and I am a bit surprised about the above statistics.

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A measure of absolute poverty quantifies the number of people below an income level necessary to afford minimal standards of food, clothing, health care and shelter.

A measure of relative poverty defines poverty as being below some relative poverty threshold. For example, if everyone's real income in an economy increases, but the income distribution stays the same, then the rate of relative poverty will also stay the same. Measures of relative poverty are almost the same as measuring income inequality: If a society gets a more equal income distribution, relative poverty will fall. Relative poverty describes how income relates to the median income, and does not imply that the person is lacking anything.

"In developed economies, poverty is more likely to be relative than absolute, in that basic needs are met even for the poor. In less developed countries, poverty is also likely to be absolute. Lack of adequate nutrition, housing, and health care are primary concerns, especially lack of food. Adequate food, health, and basic education have all been consistently demonstrated to be important foundations for economic development."

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