Question

Explain the concept of economic theory of supply and demand in the insurance market.

Answer 1

supply and demand is an economic model of price determination in a market. It postulates that, holding all else equal, in a competitive market, the unit price for a particular good, or other traded item such as labor or liquid financial assets, will vary until it settles at a point where the quantity demanded (at the current price) will equal the quantity supplied (at the current price), resulting in an economic equilibrium for price and quantity transacted. However, this model does not hold in cases with positive feedback which can lead to an economic bubble as in the housing market in the early 21st century that led to the subprime mortgage crisis.