ACHEBE Business Report I May 13 2013 Topic: Poverty and inequity – addressing key factors/key stakeholders -Factors of Poverty I By Matt French I Table of Contents 1. Glossary 2. Introduction 3. Lack of Resources 4. Lack of Jobs 4. (I) Supply and Demand Graph 5. Unequal Distribution of Wealth 5. (I) World Consumption Graph 6. Overpopulation 7. Conclusion 1 . Glossary Wage Rate: Poverty: Resource: Public Housing: 2 3 4 5 6 In a market, the price of labor is referred to as Wage Rate’ (Buck, 2008). Living in a poor condition with little or no money, goods or meaner of support (Random House Dictionary, 2013).
An item one has access to. E. G. Health, education, food, water. (Social Inclusion, 2013) “Housing project: a housing development that is publicly funded and administered for low-income families. ” (Princeton, 2013) Poverty affects millions of people worldwide. According to Shah (2013), nearly every second child is affected by poverty. Supply and demand is a huge issue when it comes to poverty. The demand for essentials such as water and food is so high compared to the supply that many people starve every day. There is also a demand for Jobs but not enough to go around.
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The World Bank (2008) deemed that the poverty line for the world is $1. 25 US per day. Shah (2013) reveals that in 2005 1. 4 billion people worldwide were living below the poverty line. There are two forms of poverty; they include relative poverty and absolute poverty. Absolute poverty meaner people living below the poverty line. Relative poverty is people living below a certain wage per week subject to what country they live in. 3. Lack of resources It is a known fact that there is an increase in demand for resources but a shortage of supply in many developing countries.
That being said there are many nations that vive in poverty due to this fact. This is obvious in developing countries such as Africa and India where there is a scarcity of resources such as food and water. Many people in these countries live below the poverty line and die from preventable deaths relating to the distribution and scarcity of resources. The increases of the price of wheat, rice and other basic foods have been devastating for poor households around the world (Pulaski, 2008). In developing countries there is a lack of access to water which is a necessity. . 1 billion people have inadequate access to a sufficient water supply (Shah, 2013). There is a lack of public housing resources in Australia. In 2012, Jordan (2012) states that as many as 40,000 people in Australia are on the waiting list for public housing. This forces many Australians onto the private rental market which increases demand. This increase in demand has forced a rise in rental prices and made it so many low earning Australian workers are struggling to afford to rent their houses.
A lot of people live in poverty due to a lack of income caused by not having a Job. Economy Watch (2010) states that: “Unemployment leads to financial crisis and reduces the overall purchasing opacity of a nation. This in turn results in poverty followed by increasing burden of debt. ” In third world countries a lot of the labor workforce is surplus labor (Andrews, 2009). This is particularly a problem in the agricultural sector of the workforce. This creates more Jobs but the marginal productivity become lower and may even become negative.
During economic crisis, this excess group of labor workers are the first to be dismissed as they are not essential to the business and this causes them to have money issues. In India lack of employment is a major factor of poverty. Even during times of good harvest in the agriculture industry the Indian farmers are not employed for the full year (Economy Watch, 2010). Households are the ones that supply labor to businesses. The supply of labor is upward sloping which meaner as the wage rate increases households want to supply a larger quantity of labor.
Businesses are the ones that demand labor from the households to work in their business. The demand for labor is downward sloping which meaner as wage rate increases the businesses in the economy demand a smaller amount of Jobs. This meaner fewer Jobs are available for the increasing number of people who want them Buck, 2008). When people become unemployed and the unemployment rate rises it meaner there are a decrease in the workforce and a decrease in quantity of Jobs demanded by firms. As there is a decrease in demand for Jobs, prices fall and the household supply of Jobs rise.
Employment is also affected by a chain reaction based on the spending of money. When the cost of basic living increases, people have less money to spend on luxury items and other leisure items. When there is a decrease in items purchased, there is also a decrease in the number of individuals employed, once leading to the significant number of people who are unemployed, all due the principle of supply and demand (Weaver, 2010). According to the Australian Bureau of Statistics (2013), the unemployment rate in Australia is currently 5. 5% as of April 2013.
This rate has been steadily increasing over the past year due to insufficient demand for workers from businesses. 4. (I) Supply and demand graph (Biz Deed, 1998) This graph shows that due to a minimum wage in developed countries the supply and demand curve are unable to meet at the equilibrium and there is a gap between them. This causes unemployment as the supply of workers is more than the demand for workers. According to Ham (2013) as minimum wages increase the overall number of people employed will drop. As employment rates fall it forces more and more people into poverty.
Around the world there is an unequal distribution of wealth. The richest 20% of people in the world consume 76. 6% of goods consumed in the world (World Bank, 2008; cited in Shah, 2008). This leads to an unequal distribution of resources and can lead to the poor feeling alienated (Riley, 2012). Furthermore, the few resources that re available are quite expensive and therefore can only be obtained by the wealthy. This unequal distribution of wealth makes it harder for those who are less fortunate and there is a significant inequality in access. . (I)World consumption graph (World Bank 2008; cited in Shah 2013) This graph shows the inequality of wealth around the world. It is an example of how unequal distribution of wealth contributes to poverty as the world’s poorest people are given hardly anything to consume. Overpopulation is defined as too many individuals living in the same place that is too mall to support them or there are not enough resources to support each individual (Weaver, 2010). Countries such as India are in poverty due to the amount of people living in the country.
The increase in demand due to overpopulation affects the supply that is available to each individual. Factors that are relevant and necessary to the average person such as food, water and shelter are poorly allocated and sometimes not allocated at all, to people in overpopulated countries. High birth rates are strongly contributing to overpopulation in developing countries. Poverty is a significant problem around the world. It is brought on by many factors such as a lack of resources, a lack of Jobs, unequal distribution of wealth and overpopulation.
Supply and Demand is a microeconomic principle that affects poverty around the world and there is a bigger supply of workers than employers willing to hire them. There is also a higher demand for resources than supply available. These are two of the main factors that cause poverty. Specifically in Australia people are struggling to afford rent as the government has a limited supply of housing. To solve this problem the government could spend a little more on increasing public housing and therefore taking some pressure off the private rental market.