Faculty of Business and Economics

Undergraduate - Unit

This unit entry is for students who completed this unit in 2013 only. For students planning to study the unit, please refer to the unit indexes in the the current edition of the Handbook. If you have any queries contact the managing faculty for your course or area of study.

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0 points, SCA Band 3, 0.000 EFTSL

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FacultyFaculty of Business and Economics
Organisational UnitDepartment of Economics
OfferedClayton First semester 2013 (Day)
Clayton Second semester 2013 (Day)
Coordinator(s)Mr Graham Forbes


This unit builds on the student's understanding of economics as presented in ECC1000 by introducing concepts of utility, risk behaviour by consumers and the role of insurance companies in providing policy vehicles to assist consumers to avoid financial loss.


The learning goals associated with this unit are to enable the student to understand the concept of utility and its role in affecting consumer demand and behaviour in relation to risk and insurance. In particular:

  1. understand the concept of a utility function and the expected utility theorem, and their economic properties
  2. understand the relationship between the concept of utility and risk behaviour by consumers and investors - including risk aversion, risk neutrality and risk seeking behaviour
  3. describe how considerations of utility and of risk affect consumer choice and can lead to utility maximisation
  4. the role of insurance in affecting risk outcomes and considerations of utility and protecting policyholders from adverse financial outcomes
  5. understand the ways insurance companies help to reduce or remove risk
  6. be aware of the issues of "moral hazard" and "adverse selection" as they affect insurance provision
  7. be able to analyse simple insurance problems in terms of utility theory.


In semester test: 100%

Chief examiner(s)

Contact hours

2 hour tutorials for 3 weeks