According to the World Bank (2000), "poverty is pronounced deprivation in wellbeing." In other words, poverty refers to a lack of resources and opportunities that prevent individuals from living a fulfilling and healthy life. There are several different ways to measure poverty, including the headcount index, poverty gap index, and poverty line.

Headcount Index

The headcount index is the most widely used measure of poverty. It simply measures the proportion of the population that is considered poor, often denoted by P0. This measure does not take into account the severity of poverty, only the number of people experiencing it.

Poverty Gap Index

A slightly more nuanced measure of poverty is the poverty gap index (PGI). This index adds up the extent to which individuals on average fall below the poverty line, and expresses it as a percentage of the poverty line. The PGI takes into account the severity of poverty, not just the number of people experiencing it.

Definition of Poverty Line

The poverty line is a measure used to distinguish the poor from the non-poor. It is calculated by estimating the minimum required consumption levels of basic goods and services, such as food, clothing, shelter, and health care. This allows policymakers to determine a minimum standard of living and identify those who are unable to meet it.

Absolute Poverty

Absolute poverty refers to a situation in which a person's income is not enough to meet their basic needs for survival. This means that all of their income is consumed by the minimum amounts of food, clothing, and shelter necessary to stay alive.

Poverty Trap

A poverty trap is a vicious cycle in which poverty and underdevelopment breed more poverty and underdevelopment, often from one generation to the next. This can occur at the individual, community, or national level and can be difficult to escape.

Basic Needs

The term "basic needs" is used by the International Labour Organization to describe the necessary goods and services (such as food, shelter, clothing, sanitation, and education) required for a minimum standard of living. Ensuring that all individuals have access to these basic needs is an important step in reducing poverty.

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