Questions and Answers

1. Since 2005, food prices in Indonesia have been:

- Increasing

2. How does Pak Solhin rationalize the fact that his employer, a local farmer, cut his job rather than his wages?

- If his employer cut his wages below a certain level, Pak Solhin would not be able to afford enough food to give him the strength to work

3. Where do poverty traps stem from?


- Biological Mechanisms


4. Which of the following variables can be represented on a capacity curve’s y-axis?


- Future Income, Work Capacity


5. If the returns to education were high for low levels of schooling, but were low for all higher levels, what shape would we see on our graph between education today and income tomorrow?


- An inverted L shape


What conditions might lead to an s-shaped poverty curve? (Hint: think back to the examples discussed in lecture.)

The S shaped curve is made up of the relationship between wage and nutrition-how much better do you eat if you have a little more income-and the relationship between nutrition and productivity-how much stronger to do you become if you have a bit more to eat.  Low wages and very little food consumption are obviously the main cause for an s-shaped poverty curve. When the poor have very little wages, they are less likely to spend a great proportion of that on food leading to low nutrition and productivity.