Chapter 4

Question 1

Which expression best defines supply and demand?
a. Supply is the provision of something and demand is need at any price. □
b. Supply is provision of something as cheaply as possible and demand is need at
that price.
□
c. Supply is the provision of something and demand is the need for something but
only at a certain price.
□
d. Supply is the provision of something at any price and demand is need at the
cheapest price.

Answer 1

c. Supply is the provision of something and demand is the need for something but
only at a certain price

Question 2

2. Which of these is not a tool that can be used to manage supply and demand?
   a. Historic information. □
   b. Competitive pricing. □
   c. Exclusiveness. □
   d. Using only online advertising

Answer 2

D. Using only online advertising

Question 3

Which type of insurance would be described as a necessity in the UK?
a. Pet. □
b. Motor. □
c. Home contents. □
d. War. □

Answer 3

b. Motor.

Question 4

4. If the market is said to be in equilibrium what is the relationship between supply and
   demand?
   a. Just enough supply to meet demand. □
   b. A little more supply than demand. □
   c. A little more demand than supply. □
   d. No link between supply and demand.

Answer 4

a. Just enough supply to meet demand

Question 5

If there is more demand for insurance than insurers in the market what will be the
likely result?
a. More insurers will leave the market. □
b. Rates will increase. □
c. Rates will decrease. □
d. Regulators will intervene

Answer 5

b. Rates will increase

Question 6

6. After a major loss what is likely to happen to the supply of insurance?
   a. Supply will increase as new insurers join the market. □
   b. Supply will stay the same. □
   c. Supply will reduce as insurers leave the market. □
   d. Regulators will seek to control insurers’ movement in the market

Answer 6

c. Supply will reduce as insurers leave the market

Question 7

7. How might a change in the law making more classes of insurance compulsory impact
   on supply and demand?
   a. Greater demand will be created. □
   b. Demand will stay the same. □
   c. Demand will reduce. □
   d. Greater demand will be created at the start but will then reduce.

Answer 7

a. Greater demand will be created.