What is poverty threshold? Sounds like assumption from outside world

Question

Was reviewing IR questions in Peterson's Master the GMAT 2015. IR Q11.2 in Practical Test 2 (pg. 461) does not make sense to me.

On what ground does the question assume the definition of poverty threshold?

11.1 A. Deduct 15% (ratio 1.00) from 25% (ratio 1.50). 
11.2 C.  Approximately 9%  of people over the age of 65 had income  below the poverty threshold . If there were 3.5 million such people, then you can find the total number of people over the age of 65.

lamderson · Answer

It says it right there in the question "the income-to-poverty ratio determines how close someone's income is to the poverty threshold". Income-to-property ratio is Income/Poverty. If it equals 1 then the person is at the poverty threshold, >1 above it, <1 below it. Imagine instead of "poverty" they used "average income" then the ratio is how close the person's income is to the average, and in this case the average income would be the threshold.

gmatretest · Answer

Okay ... poverty threshold is the minimal income. Rare question which requires bringing in knowledge from outside. 
Thanks for help.

HMC · Answer

Is the answer to second question B 
The first Question - I couldnt get an answer - Is it asking number or percentage
I think it is percentage ... is the answer D?

ShravyaAlladi · Answer

can somebody elaborate the answer to second question

abhimahna · Answer

I believe in Question 1. It is telling the %. And A should be the answer as we have a change of approx 9% from 1.00 to 1.50.

How did you get the answer to 2nd as B? I am getting the answer to 2nd as A.

We have almost 35% of the people below poverty threshold.

It implies 35% of Total = 3.5 million or Total -1 0 million.

Is the OA for 2nd mentioned correct?

ashfsk · Answer

I would assume 'income below poverty threshold' to mean income<poverty=> income/poverty<1. At a ratio of 1 we have about ~9.8% population of 65 and older. So I took 9% as the value. so the total population=(3.5/9)*100~39mn

mikemcgarry · Answer

Dear HMC & ShravyaAlladi , I'm happy to respond.

The first thing I will say to gmatretest is that if you want to impress folks at business school, you need to be comfortable with basic economic terminology. The word " threshold " is used metaphorically to indicate the "line" where things begin. There is a certain annual income that defines the beginning of poverty--below that income is the legal definition of poverty, so the income exactly on that line is on the " poverty threshold ." Here's the second question: 11.2 If in 2010, 3.5 million people over the age of 65 had incomes below the poverty threshold in the United States, then the total number of people over the age of 65 in the United States was approximately ______________. (A) 10 million (B) 23 million (C) 39 million (D) 78 million On the graph, we begin by looking at the lower line with the hollow squares, not the upper line with the solid square. This lower line is for people 65 and older. Someone with an income-to-poverty ratio of exactly 1 would be someone exactly on the poverty threshold. The dot gives the percentage for anyone at that ratio or below, so the dot for ratio = 1 gives the percentage of everyone below the poverty threshold---again, that's the legal definition of poverty. That dot is slightly below 10%, maybe close to 9%. We'll estimate 10%. If it were exactly 10%, and that equaled the 3.5 million people, there would be a total of 35 million people at the age of 65 or older. Actually, the percent is slightly lower than 10%, so we need a number slightly larger than 35 million. That's enough to isolate 39 million, (C), as the answer. Once again, I want to stress something to everyone. If you are getting an MBA, if you are planning to devote your entire life to working in the business world, then the way you demonstrate your interest and aptitude is to learn as much about that world as possible. Read the WSJ. Read the E conomist magazine. Read Bloomburg Businessweek. Read the business section of any newspaper. Get to know the terms. Get to know the issues. Make yourself as much of an expert in real world economical issues as you can. Knowledge is power. Do everything you can to acquire knowledge about the field in which you plan to spend your lives. Does all this make sense? Mike

What is poverty threshold? Sounds like assumption from outside world

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