Abstract
Poverty is defined as “pronounced deprivation in well-being,” where well-being can be measured by individual or households' possession of income, health, education, assets, and certain rights in a society such as freedom of speech. Poverty is usually referred to as “whether individuals or households have enough resources or abilities to meet their needs.” Poverty reduction is considered to be one of the most important goals of development and of development policy. This chapter introduces concepts and methods for measuring and understanding poverty and its causes. It further addresses the various dimensions of poverty and the causes of poverty and justifies the rationale for measuring poverty. In addition, this chapter explains the steps in measuring poverty and the various indicators that are widely used to measure it. The chapter discusses how poverty lines are constructed after a suitable indicator is chosen. The derivation of the poverty line based on the cost of basic needs approach is also described. Along with this, various measures of poverty, such as the headcount ratio, poverty gap squared, and so on, are briefly discussed.
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