A coastal town faces two hazards: storm surge (probability 0.02 per year, average damage £3 million) and earthquake (probability 0.005 per year, average damage £12 million).

The town can invest in mitigation:
• Storm‑surge mitigation costs £0.5 million for each 0.01 reduction in probability (linear).
• Earthquake mitigation reduces the damage cost by 10 % for each £1 million invested (linear).

With a total budget of £5 million, determine how much should be spent on each mitigation type to minimise the expected annual loss after mitigation, and state the resulting expected annual loss (in £).

Question

A coastal town faces two hazards: storm surge (probability 0.02 per year, average damage £3 million) and earthquake (probability 0.005 per year, average damage £12 million).

The town can invest in mitigation:
• Storm‑surge mitigation costs £0.5 million for each 0.01 reduction in probability (linear).
• Earthquake mitigation reduces the damage cost by 10 % for each £1 million invested (linear).

With a total budget of £5 million, determine how much should be spent on each mitigation type to minimise the expected annual loss after mitigation, and state the resulting expected annual loss (in £).

Accepted Answer

Spend £1 million on storm‑surge mitigation and £4 million on earthquake mitigation; expected annual loss = £36 000

Gce Model Questions Vol1 2020 Geography Question 28

Answer Options

About This Question

Master the Exam!