ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Risk: Uncertainty arising from the possible occurrence of given events that would result in loss with no opportunity for gain.

Detailed explanation-2: -Speculative risk is a category of risk that, when undertaken, results in an uncertain degree of gain or loss. In particular, speculative risk is the possibility that an investment will not appreciate in value.

Detailed explanation-3: -Chance of Loss distinguished from Objective Risk◦Chance of Loss – Probability event that causes loss will occur. ◦Objective Risk – Relative variation of actual loss from expected loss. **The chance of loss may be identical for 2 groups but objective risk may be quite different.

Detailed explanation-4: -Insurance is a contract where one party agrees to indemnify the loss of other party at the time of loss, for a consideration. The principle of indemnity in an insurance contract safeguards the insured to put him in the same position that he/she would have been in if the loss had not occurred.