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RISK POOLING: Combining the uncertainty of individuals into a calculable risk for large groups. For example, you may or may not contract the flu this year. However, if you're thrown in with 99,999 other people, then health-care types who spend their lives measuring the odds of an illness, can predict that 1 percent of the group, or 1,000 people, will get the flu. The uncertainty is that they probably don't know which 1,000 people, they only know the number afflicted. This little bit of information is what makes risk pooling possible. If the cost is $50 per illness, then an insurance company can insure your 100,000-member group against flu if they collect $50,000 ($50 x 1,000 sick people), or 50 cents per person. By agreeing to pay the cost of each sick person in exchange for the 50 cent payments, the insurance company has effectively pooled the risk of the group.
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Lesson 7: Market | Unit 4: Adjustment
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Page: 15 of 22
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A surplus exists if the quantity demanded is less than the quantity supplied at the current market price.- A surplus exists if the market price is 70 cents.
- The quantity demanded is 200 tapes and the quantity supplied is 600 tapes, giving a surplus of 400 tapes.
- This surplus induces the price to decline down to the equilibrium level of 50 cents
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ELASTIC DEMAND The general demand relation in which relatively small changes in price cause relatively large changes in quantity demanded. Small changes in price cause relatively large changes in quantity demanded or the percentage change in quantity demanded is larger than the percentage change in price. This characterization of elasticity is most important for the price elasticity of demand. Elastic demand is one of two general elasticity relations for demand. The other is inelastic demand.
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WHITE GULLIBON
[What's This?]
Today, you are likely to spend a great deal of time strolling through a department store looking to buy either a coffee cup commemorating the first day of winter or a video game player. Be on the lookout for neighborhood pets, especially belligerent parrots.
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This isn't me! What am I?
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The word "fiscal" is derived from a Latin word meaning "moneybag."
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"The past is a foreign country; they do things differently there." -- Leslie Poles Hartley, Writer
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LBO
Leveraged Buyout
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