Which of the following best describes how policy-makers typically define poverty?

• A. Poverty is defined as living in a rural area with limited access to public transportation.
• B. Poverty is defined as having income below a specified threshold that is considered necessary to meet basic living needs.
• C. Poverty is defined as any individual who is unemployed, regardless of income.
• D. Poverty is defined as the inability to purchase luxury goods and services.

Answer: (B)

Verified step by step guidance

1. Understand that in microeconomics and public policy, poverty is typically defined in terms of income relative to a threshold necessary to meet basic living needs, rather than by location, employment status, or luxury consumption.
2. Recognize that the poverty line or poverty threshold is a specific income level set by policymakers, which represents the minimum income required to afford essentials such as food, shelter, and clothing.
3. Evaluate each option by comparing it to this standard definition: living in a rural area or being unemployed does not necessarily mean one is below the poverty line, and inability to purchase luxury goods is not a criterion for poverty.
4. Identify that the correct description of poverty is the one that refers to having income below a specified threshold necessary to meet basic living needs.
5. Conclude that the best definition aligns with the income-based threshold approach, which is widely used for policy-making and poverty measurement.