Reference no: EM133327976

Part 1: We have talked a lot about how many political and economic policies are based on the notion that consumers are rational, logical, calculating and seek to maximize their satisfaction.

Under this paradigm a rational logical consumer would conduct a complete analyzes of their life to assess when, if, and how much insurance they should purchase. They would insure themselves against events that are rare but whose occurrence would result in significant loss. They would also insure themselves against events that are frequent and would result in severe losses. For all other events they would seek to reduce the likelihood of the event, the severity of the event, and save in the event of an event occurring.

Based on this assumption, most working people would never go without home insurance, health insurance, vehicle insurance, disability insurance, or unemployment insurance. Yet millions of people don't purchase health insurance, life insurance (families), disability insurance (only 7 states mandate disability insurance as part of payroll taxes), and most don't carry unemployment insurance beyond that mandated by the state (if you become unemployed because you will only get 45% of what you were earning 18 prior to becoming unemployed). Until the late 1980's early 1990's vehicle insurance wasn't required and many people drove without vehicle insurance.

States started to mandate vehicle insurance because the tax payer was suffering huge losses. People without insurance were getting hurt and ending up in the emergency room. One night stay in a emergency room can cost $10,000+. People often didn't have that type of money. A lot would be forced to sell their assets, borrow, or declare bankruptcy. For those with nothing, the tax payer would be stuck paying the bills; not to mention the huge losses the tax payer would suffer for those who either die or became disabled (lost investment in their education, human capital, tax revenues, etc.)

Question 1: What does this irrational behavior say about the foundation upon which our public policies are based?

Question 2: Why do you think that people get so upset that the Affordable Care Act (Obamacare) requires everyone to have health insurance but no one one complained, or is complaining, being mandated to have vehicle insurance? As rational, logical, and calculating individuals should they see this as something they are already doing?

Part 2:

Question 3: How important is gifting to you? Do you think there is too much or too little emphasis in our society on gifting and celebrating holidays? For your holiday gift, how would you feel about someone donating a goat to a family in an African village? Explain your answers.
Question 4: Why would a company use location-based marketing? Can you give an example of a Smartphone App that uses location-based marketing?
Question 5: Although most would agree that sustainable behavior is a good thing, what are some of the reasons it is slow to be adopted?