Question

On the R-S graph, given a point E, if r decreases and q decreases, the new point will be _______ point E.

	to the right below
	to the right above

	to the right parallel to
	all of the above are possible

none of the above

On the R-S graph, given a point E, if r decreases and q INCREASES, the new point will be _______ point E.

	to the right above
	to the right below

	to the right parallel to
	all of the above are possible

How can we logically explain that the area of partial insurance is below the full insurance line?

Full insurance requires q < IH - IS for a given value of q. To turn this into partial insurance, we need a q (partial) lower than q to satisfy q(partial) < IH - IS So for every point on the full insurance curve we lower q which would lower the intersection point between IH' and IS' at every level of IH' and all these points are below the full insurance line.

Full insurance requires q = IH - IS for a given value of q. To turn this into partial insurance, we need a q (partial) HIGHER than q to satisfy q(partial) < IH - IS So for every point on the full insurance curve we lower q which would lower the intersection point between IH' and IS' at every level of IH' and all these points are below the full insurance line.

Full insurance requires q = IH - IS for a given value of q. To turn this into partial insurance, we need a q (partial) LOWER than q to satisfy q(partial) > IH - IS So for every point on the full insurance curve we lower q which would lower the intersection point between IH' and IS' at every level of IH' and all these points are below the full insurance line.

Full insurance requires q = IH - IS for a given value of q. To turn this into partial insurance, we need a q (partial) LOWER than q to satisfy q(partial) < IH - IS So for every point on the full insurance curve we INCREASE q which would lower the intersection point between IH' and IS' at every level of IH' and all these points are below the full insurance line.

Full insurance requires q = IH - IS for a given value of q. To turn this into partial insurance, we need a q (partial) LOWER than q to satisfy q(partial) < IH - IS So for every point on the full insurance curve we lower q which would lower the intersection point between IH' and IS' at every level of IH' and all these points are below the full insurance line.

Answer 1

Given a point E in an IH-IS space, if r decreases and q decreases where is the new point (E') relative to point E? a. above left of point E b. above right of point E c. below left of point E d. below right of point E e. could either be above right, parallel right, or below right of point E

Answer : The point E' will lie to the c. below left of point E as given that both r decreases and q decreases at this new point (E') relative to point E which is only possible to the left down point to E as shown in the diagram below: