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Risk describes any economic activity in which there are uncertain outcomes. For example, a person who places a bet on the flip of a coin faces two different outcomes with equal chance. A driver of a car knows that there is a chance of a collision.
- Patrick M. Emerson
- 2019
The basic definition of risk is that the final outcome of a decision, such as an investment, may differ from that which was expected when the decision was taken. We tend to distinguish between risk and uncertainty in terms of the availability of probabilities.
Sample question. Refer to Figure 1.1. Describe how the economic problem affects each of the following in a country that you have studied: i a typical family. i the owner of a ta. iii the government. Sample answer: in monetary terms by the government. Wants are likely to be greater – a person might like a more up-to-date mobile .
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Nov 10, 2008 · Risk and Economic Burden. 10 November 2008 by Tejvan Pettinger. Readers Question: how does risk create an economic burden? Generally, people are risk-averse. For example, you may have a 0.1% chance of your house burning down. But, if it did burn down, the effects would be disastrous.
Risk in economics refers to situations where potential outcomes and their likelihoods are known, while uncertainty exists when these probabilities are not known. Common sources of uncertainty in economics include lack of perfect knowledge, unpredictable events such as natural disasters or political upheavals, and complex systems where the ...
- Explanation
Nov 5, 2001 · Frank H. Knight established the economic definition of the terms in his landmark book, Risk, Uncertainty, and Profit (1921): risk is present when future events occur with measurable probability. uncertainty is present when the likelihood of future events is indefinite or incalculable.
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Mar 22, 2021 · Updated March 22, 2021. What Is Economic Risk? Economic risk refers to the possibility that changes in macroeconomic conditions will negatively impact a company or investment. For instance, political instability or exchange rate fluctuations can impact losses or gains.
