"Running Head: BUSINESS ECONOMICS CONCEPTSBusiness economics conceptsNameCourseDate BUSINESS ECONOMICS CONCEPTSWhy are consumers considered to be risk averse?Consumers are normally considered to be risk averse because they do not like uncertainty.Consumers will always stay away from risks when they do not like the potential outcome. Anexample is the instance when a consumer spends $10 for a lottery or gambling ticket which has achance of winning $500. In this case, the consumer would rather not pay the $10 knowing thet itis very hard to win the $500. What methods could used to deal with risk?Methods to deal with risk averse include; purchasing insurance like health as well as fire togetherwith home owners and car insurance. There forms of insurance will provide peace of mind to theconsumers during the instance that medical bills arrive, homes burning down or they getinvolved in car accidents. Another method of dealing with risk averse is through diversificationwhich implies that the minimizing of risks is achieved through replacing one risk with a largenumber of small unrelated risks (Cassar, 2009). Consumers will be advantaged through usingtheir savings to purchase financial assets. Another method is consumers buying multiple sharesof different stocks other than putting all the money on a single large stock and it minimize therisks of consumers losing all their money at once. It has been said that a dollar received today is worth more than a dollar receivedtomorrow. What does this mean and what is the significance to the economy?The statement that a dollar received today is worth more than a dollar received tomorrow impliesthat a dollar received today has the possibility of earning interest up to the time that the futuredollar will be received. When consumers invest their money or tend to earn interest on that sumof money, in economic terms, it is worth more as compared to consumer who have the money at BUSINESS ECONOMICS CONCEPTShand. Another way that the dollar impacts the economy of a country is with the imports. Whenthere is a decrease in the value of the dollar, the cost of imports can increase. An example is thecost of gas as well as the cost of overseas trips ("Why does time value of money (TVM) assumethat a dollar today is worth more than a dollar tomorrow?", 2015). Nevertheless, when the valueof the dollar is low in the US. It is good for the producers since they can export products at verylow prices. What is the difference between the present value of a future sum of money and the futurevalue of a present sum of money? The present value is the current worth of a future sum of money or the streams of cash flowsgiven a specific rate of return. Future cash flows are discounted at the discount rate and thehigher the discount rate the lower the present value of the future sum of money. The future valueis a measure of the nominal sum of money which a certain sum of money is worth at a specifictime in the future assuming a certain interest rate. The present value of today’s dollar implies that$100 today is worth the present value. Nevertheless, if you save that $100 in the house, in thefuture, it would be worth less than the face value because of inflation ("The Present Value andFuture Value of Money", n.d.). The future value of $100 depends on whether you invest themoney so that it earns some interest. If the interest paid is 5% after a year, you would have $105.What is the significance of these concepts to economics?The significance of these concepts is that the federal government tends to keep the interest rateslow so as encourage spending that in turn ensures demand as well as economic growth. When thegovernment has the possibility of keeping the interest rates away from increasing, the economy BUSINESS ECONOMICS CONCEPTScan have the potential of growing in a healthy manner. Nevertheless, it is significant that theincome of consumers increases beyond the interest rate. If you deposited $1,000 in an account paying 6% interest compounded annually, how longwould it take to double?Formula used is A=P(1+r/n)^ntA=2000, P=1000, r=0.06, n=1Hence 2000=1000(1+0.06/1)^tThe amount is divided by 10002=(1.o6)^tUsing logsLog (2)=log(1.06^t)Log (2)=tlog(1.06)Both sides are divided by log (1.06)T=11.9 years which is approximately 12 years "