Insurance: Is it worth it? 12 th Grade Agricultural Economics.

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Insurance: Is it worth it? 12 th Grade Agricultural Economics

Micro Vs. Macro Economics Microeconomics: branch of economics that deals with smaller units like individuals or a single firm. Macroeconomics: branch of economics that deals with choices as they relate to the entire economy. What branch of economics would rural road safety fall under?

Cost incurred to secure medical treatment and medications

Examples of Direct Costs MedicationPolice Response Funeral Home Costs (transportation, burial, etc.)

Costs not directly associated with prevention and health care activities that accrue to individuals, society, or employers such as productivity losses.

Examples of Indirect Costs Replacement of equipment Any lost goods (hay, corn, etc.) Legal Fees

Opportunity Cost Opportunity cost: the most highly valued opportunity or alternative forfeited when a choice is made. 10 Example: You have 10 dollars. You can buy a new shirt or you buy you and your girlfriend lunch. You buy the shirt and it is ugly and lime green. This color makes her break out in hives. The opportunity cost is you could have bought lunch. If you would have bought lunch your girlfriend would not have hives.

What is risk? Risk: situation in which the outcome is not certain, but the probabilities can be estimated. Example: Any time a person opens a business they are taking a risk because they do not know if the venture will be a success, but they can research to see how desired their service/product is. 100

Dealing with Costs: Insurance Taking risks is part of life – When we drive, we risk an accident. – When we buy stocks, we risk a fall in prices. – When we go skiing, we risk breaking a leg. We can’t avoid all risk, but we can take it into account when we make decisions

Is the risk worth it? Risk aversion is a dislike of uncertainty. - People dislike bad things more than they like comparable good things -If the possible benefits outweigh the possible dangers or disadvantages, we may decide the risk is worth it Disadvantages of driving: cost of car, chance of getting in wreck, gas money, insurance payments Advantages of driving: mobility, freedom, opportunity, fun

One way to deal with risk is to buy insurance A person facing a risk pays a fee to an insurance company, which in turn agrees to accept all or part of that risk For example: – Paying a fee for car insurance every month means that if you’re in a wreck, the cost is covered (usually) – Not everyone who buys car insurance gets into a wreck, so the fees paid by everyone cover the risk and cost of the few people who do have an accident