Answer to Question #262558 in Microeconomics for Uditanshu

Question

Breifly discuss the factors that determine demand for an insurance policy and how they different then normal determinant demand of a commodity?

Answer 1

Solution:

The factors that determine demand for an insurance policy includes the following:

·        Cost of insurance.

·        Wealth

·        Probability of loss.

·        The value of the time exposed to risk.

They are different from the normal determinant demand of a commodity, which include the following:

·        The level of income.

·        Interest rates.

·        Inflation

·        Future expectations.