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Poverty Quantification- P2, Headcount Ratio, Poverty Gap

7. Consider a 10 person economy. The poverty line is 1. In the first period the income distribution is: (.5,.5,.75,.75,1,1,1.5,1.5,2,2).

a. What is the level of poverty? Answer utilizing headcount ratio, [normalized] poverty gap, and P2 measures.

b. Suppose that in the next period one of the individuals making 1.5 now makes 1.75. What if any is the change in the level of poverty?

c. Go back to the original numbers. Now suppose that in the next period both of the individuals making .75 now make 1. What if any is the change in the level of poverty?

d. Go back to the original numbers. Now suppose that in the next period both of the individuals making .75 now make .625, and both of the individuals making .5 now also make .625. What if any is the change in the level of poverty?

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7. Consider a 10 person economy. The poverty line is 1. In the first period the income distribution is:
(.5,.5,.75,.75,1,1,1.5,1.5,2,2).

a. What is the level of poverty? Answer utilizing headcount ratio, [normalized] poverty gap, and P2 measures.
- Headcount Ratio=
Where "n" is a population size where "q" people are poor, (World Bank, nd).
Since the population size is given as "10" and the poverty line is given as "1," the Headcount Ratio= 2:5
(There are four people with incomes less than "1," use this value for "q" in the preceding equation:
- Normalized poverty gap= Average Poverty Gap/Absolute Poverty Line (NPG= APG/Yp)
- Average Poverty Gap= Total Poverty Gap/Population (APG=TPG/N)
- Total Poverty ...

Solution Summary

Illustrates the use of poverty gap, headcount ratio, and P2 measures for the purposes of quantifying the poverty level. Several specific calculations are made to illustrate specific formula. References included.

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