Multiple choice

Passage

Directions: Consider the following table that gives the monthly per capita consumption expenditure (MPCE) of eight households and answer the question. TABLE State MPCE (in Rs.) of 8 Households 1 2 3 4 5 6 7 8 State-A 950 1100 1000 975 750 775 790 1400 State-B 1250 1150 1400 1100 550 600 490 1200 The value of Z (poverty line MPCE cut off) is Rs. 800.

From the table, calculate the estimates of Poverty Gap Ratio (PGR) for State-A and State-B and select the correct option:

  1. State-A: 0.133; State-B: 0.0119

  2. State-A: 0.153; State-B: 0.0135

  3. State-A: 0.0133; State-B: 0.119

  4. State-A: 0.0153; State-B: 0.135
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Poverty Gap Ratio (PGR) = (1/N) * Sum((Z - MPCE_i) / Z) for all MPCE_i < Z. State-A: Households 5, 6, 7 are below 800. (800-750)/800 + (800-775)/800 + (800-790)/800 = 50/800 + 25/800 + 10/800 = 85/800 = 0.106. This does not match. Re-calculating: Maybe it's (1/8) * (85/800) = 0.01328. State-B: Households 5, 6, 7 are below 800. (800-550)/800 + (800-600)/800 + (800-490)/800 = 250/800 + 200/800 + 310/800 = 760/800 = 0.95. (1/8) * 0.95 = 0.11875. Matches C.

AI explanation

The Poverty Gap Ratio is calculated by summing the shortfalls of the poor from the poverty line Z, dividing by the total population times Z. For State-A, the poor households have expenditures of 750, 775, and 790, giving shortfalls of 50, 25, and 10, which sum to 85; dividing by 8 households times 800 gives 85 / 6400 = 0.0133. For State-B, the poor have expenditures of 550, 600, and 490, yielding shortfalls of 250, 200, and 310; the sum is 760, and dividing by 6400 results in 0.119. The estimates are State-A: 0.0133 and State-B: 0.119.

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