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Rising prices, especially for essential goods such as energy and food, can have a significant impact on low-income households. The reason behind this is that low-income households tend to allocate a larger proportion of their income towards necessities like food, energy, and shelter compared to middle- or high-income households. As a result, any increase in the prices of these essential items places a heavier burden on their overall budget.

When prices rise, low-income households often face difficulties in meeting their basic needs. They may have to allocate a larger portion of their income to cover the increased costs of food and energy, leaving less money available for other essential expenses like healthcare, education, or transportation. In some cases, they may even be forced to make difficult trade-offs, such as cutting back on the quality or quantity of food they consume, compromising on heating or cooling their homes adequately, or sacrificing other necessities to make ends meet.

Additionally, low-income households typically have limited financial resources and minimal savings. This lack of financial cushion makes them more vulnerable to unexpected price hikes. Unlike middle- or high-income households, they may not have the means to absorb the impact of rising prices without experiencing severe financial strain or hardship.

The disproportionate impact of rising prices on low-income households can contribute to the widening of income inequality and perpetuate the cycle of poverty. It underscores the need for policies and support systems that address the specific challenges faced by these households, such as targeted social assistance programs, subsidies for essential goods and services, and initiatives aimed at increasing their earning potential and improving their overall financial stability.