Below are three microeconomics problems (or it could be insurance and investment problems as well) related to absolute risk aversion taken from the book The Structure of Economics: A Mathematical Analysis  3rd ed. by Eugene Silberberg and Wing Suen. These problems are include in the chapter Behavior Under Uncertainty. Absolute risk aversion has implications for the willingness of individuals to accept risk. The higher the coeffficient of absolute risk aversion, the higher the risk premium the individual is willing to pay. Relative risk aversion is absolute risk aversion times W, while W indicates initial Wealth. The higher the coeffficient of relative risk aversion, the higher the relative risk premium.

Below are two microeconomics problems (or it could be insurance and investment problems as well) related to relative risk aversion taken from the book The Structure of Economics: A Mathematical Analysis  3rd ed. by Eugene Silberberg and Wing Suen. These problems are include in the chapter Behavior Under Uncertainty. Absolute risk aversion has implications for the willingness of individuals to accept risk. The higher the coeffficient of absolute risk aversion, the higher the risk premium the individual is willing to pay. Relative risk aversion is absolute risk aversion times W, while W indicates initial Wealth. The higher the coeffficient of relative risk aversion, the higher the relative risk premium.

1.The cost is cheaper.

First, online broker fee is cheaper. Online brokerage firms charge flat rates for each transaction which sometimes lower than broker fee. This is different with common broker fee that sometimes charge additional fee because of his/her reputation, additional erning, etc.

2. Anytime and anywhere, need internet connection only

It is real time stock trading, we know exactly by ourself the stock price movement (historical prices and current price) on an online application. So we do not need to waste our time to call or visit a broker. Even we’re at home or on vacation, as long as there is an internet connection, we’re still can do a trading.
3. Do not depends on a certein broker

A broker sometimes needs to break for vacation or take a rest. When we need to do a transaction at the moment, we’re now not depending on the broker’s time schedule.

4. Free to choose. It is our money and our choice, not the broker choice.

Sometimes a broker drive us to do a transaction because he/she feels that it will give a big earning. But in our opinion, another transaction will earns more money. Regardless who is right later, we have our freedom to do what we want to do.
5. Responsibility for the sale and purchase of stock is full in our hands. It is to avoid mistakes that broker enter wrong order prices.

It can’t be denied that broker or us can make a wrong input on a purchase/sale of stock. With the same dollar of wrong input, we can excuse our mistake. mad for broker’s mistake. Contrarily, we tend to be mad for broker wrong input.

6. Save our time

Just sit in the front of computer, and the game will start immediately. We don’t need to waste our time to call, walk, and waiting for the response. E-trading makes everything easier.

There are so many kind of business that offer and use insurance. People also need insurance to protect themself from the risk of uncertainty in the future. Nothing can guarantee our future. That’s why insurance is needed to guarantee the risk of uncertainty. Here are introduction, terms, and definition of insurance and everything related to insurance.