Henderson Owned a Concrete Block Building Valued at $20,000

question 3

True/False

Henderson owned a concrete block building valued at $20,000. Because it was virtually fireproof, he insured it for only $10,000 under a policy of insurance which contained an 80% co-insurance clause. Some time later, the building was damaged by fire. Under a co-insurance clause, the insured becomes a partial insurer if he fails to maintain the required amount of insurance on the insured property.

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Definitions:

Average Propensity

The ratio of total consumption to total income, indicating the average tendency of consumers to spend their income.

Disposable Income

Net pay after taxes and other deductions, available for spending, saving, or investment.

Consumption

The utilization of products and services by families.

Marginal Propensity

The ratio of the change in an economic variable, such as consumption or saving, to the change in another, typically income.