Give the definition of SARP.

A consumer's choice behaviour is SARP if the following holds for every sequence of distinct bundles: x⁰,x¹,...,x^k

If x^{i-1} is revelead preferred to x^{i} for i=1,..,k, then x^{k} is not revealed preferred to x⁰.

SARP requires transitivity of the revealed preferences.

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An insured's building has an actual cash value of $200,000, and he has insured the property for $120,000 with an 80% coinsurance clause. A $40,000 loss occurs. How much will the policy pay?

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