1.4.2 Risk and liability

Question 1

What is the difference between limited and unlimited liability

Answer 1

Limited liability is where if a business cannot pay the debt, than the individual only has to pay debt of what they own for example shareholders in a business. When the business goes in debt shareholders only pay the debt from their share hence limited liability.
Unlimited liability is where the business goes in debt and the individual has full responsibility for all expenses. These are common in types of businesses such as sole traders and partnerships.

Question 2

Define risk in economics.

Answer 2

This can be the risk suffered by banks when they lend loans. Or the risk of return on investment and returns are actually lower than expected.