Advanced Microeconomics - Consumer Theory (Marshallian and...

Question 1: Consumer Theory 1.1: In both the Marshallian and Hicksian consumer optimisation problems, it is assumed that consumers are supposed to be rational. The main focus of these problems are cost minimisation and utility maximisation, which play a huge part in consumer demand, but in real life, these are not the only problems that are considered. Also, it is assumed that every consumer’s indifference curve for two goods would be the same – they are very generalised models, and do not take into account other factors. For example, not many consumers would spend their entire budget on said goods – one thing to consider would be a consumer’s marginal propensity to consume and save. Though both of the problems provide a framework and†¦show more content†¦As the insurer doesn’t know which agents are high-risk or low risk, the company will not offer different types of full insurance to match risk-types, as high-risk agents will prefer contracts that are designed for low-ris k agents. To solve this, the insurer will offer low-risk agents less insurance – this ensures that high-risk types do not have the incentive to choose a contract for low-risk customers, as they will want more insurance, because they know they will need to claim more. This ensures that the insurance company maintains non-negative profit, as high-risk individuals cost more to insure. However, these solutions carry agency costs, because the result is less efficient than if symmetric information was present. I believe that risk neutrality of an insurance company is a sufficient condition for insurance to take place. Insurance companies are risk-neutral to maximise expected profits, therefore as the principal, will design contracts to achieve this, as well as making certain that the agent picks the desired effort (i.e to prevent a bad state of the world) for that contract, and to make sure that the agent even picks the contract in the first place. Making sure incentives are compatible, and ensuring participation by the correct risk types, are constraints on maximising expected profits. If an insurance company was risk-averse, without the availability of symmetric information, they cannot

The Importance Of Successful Support Or Assistance From...

way of successful support or assistance from the government or their local community, until the 1940s with the creation of groups and treatment centers focused on assisting addicts. As the progressive era of the United States came to an end, the abuse of drugs and alcohol began to reach all-time highs. Dr. Hamilton Wright declared that the Of all the nations of the world, the United States consumes most habit-forming drugs per capita.† and with statistics like 470,000 pounds of drugs consumed annually, more than France and the UK combined, it was clear to the US government that something would have to be done soon. This would come in the form of the historic Harrison Narcotic Act in 1914 which would assist in banning opiates and cocaine, and limiting other drugs being imported in. The Act would be the first in a series of prohibitions over the next few decades, most notably Prohibition in 1920. However these would prove ineffective to doing anything they set out to do, including curbing the number of current addicts. The only attempt at assistance would come in the form of special hospital wards in major cities or inebriation farms, like in Florida or Ke ntucky. Both these venues would prove harmful to those who entered into their care as practices at the time were brutal. In hospitals lobotomies and sterilizations had become popular due to it being a seemingly easy way to remove mental illness or to keep it from spreading to others. Inebriation farms meanwhile treatedShow MoreRelatedInfluence Of Developed Nations During The Development Of Post Colonial States1420 Words   |  6 PagesThe Influence of Developed Nations in the Development of Post-Colonial States Official Development Assistance (ODA) is a combination of loans and grants given to developing nations with the intent of furthering development in those nations. 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For my project I am going to design a new range of Alco-pop Free Essays

For my project I am going to design a new range of Alco-pop. I choose this idea as I feel there is room in the current market to introduce a new brand. The current and most popular Alco-pops at present would be drinks such as Bacardi breeder, WKD and red square. We will write a custom essay sample on For my project I am going to design a new range of Alco-pop or any similar topic only for you Order Now These products are available in a range of flavours and have a volume on average of about 5. 5% alcohol; prices vary depending on where the product is purchased. The product I will be basing my advertising campaign around will be a new range of Alco-pop available in five different florescent flavours and designed to glow in the dark, the product will be un-missable due to the bold colours so I will be using this to my advantage to capture public attention. However my project is new to the market and the brand name and product is unknown, this will make introducing the product difficult therefore the advertising campaign will need to be effective. The audience I am aiming the product at will be young outgoing eighteen to thirty year olds. This age is the younger age of clubbers that will be more willing to experiment with new products on the market where as the older audience will be more set in there way as to what they drink. Also the audience will be drinking in more trendy modern bars and clubs in which I plan to match with the product image. The product will be named â€Å"Gloe† due to its obvious glow in the dark stature, with the name of the product being â€Å"Gloe† and the product being new on the market I need a name that people can remember therefore if they realise the drink glows in the dark the name will relates to the product. I have also removed the â€Å"w† and replaced it with â€Å"e† I have done this to imprint the brand with product recognition. The product will be available in a glass bottle, with the product name stuck on at the front. The label of the product will be mainly transparent with just the letter arrangement of â€Å"Gloe† in bold capital letters. The brand slogan will be â€Å"Gloes through† as this compliments the brand name and I am hoping to relate it in some way to the adverts I will be creating. The image I would like the product to be associated with is that of a new, modern, trendy product with slight individuality, a carefree drink that looks good, tastes great and is the only solution to a healthy night out. For the campaign I will be creating three advertisements one will be a billboard poster another will be an advertisement in a magazine and the third will be a large bus-stop poster. I have chosen these three types of media as the billboard is a large advertisement that is difficult to miss I will be placing it around the city centre where most of the nightlife will be and it will also be busy during daytime. The magazine article will be placed in magazines for men like FHM and women in magazines such as Cosmopolitian, New Look, More and 19 these are the younger trendy magazines that appeal to the target audience of the product and have discovered similar advertisements in these whilst researching. The bus-stop poster will be used as a lot of younger people use public transport due to convience and also the cost of cars and petrol. The poster will be placed in a bus station as they can become extremely busy during everyday rush hour. Each of my adverts will display the product and slogan in the top right hand corner of all of the adverts. The first advert featured in the bus-stop will be a pitch black background with a large bottle of â€Å"Gloe† centred in the foreground. The bottle will have a glowing light around it in one of the florescent colours I will use. How to cite For my project I am going to design a new range of Alco-pop, Papers

Life Insurance Legal Contract

Question: Discuss about a Case Study on Life Insurance for Legal Contract ? Answer: Introduction Life insurance can be defined as a legal contract or agreement between insurer and insurance policy holder in which it is promised on the part of the insurer to the policy holder or his or her designated beneficiary to pay a sum of money after death of the insured person (Cockerell, 2005). This thesis provides both theoretical and analytical ideas about the concepts of traditional net cost method and interest adjusted method that are applicable in the process of computing cost of life insurance. Presently, it has become necessary on the part of policy holders to understand these concepts so that they can avoid the losses that may occur to them as a result of inaccurate cost variations that exist most of the times among similar or comparable life insurance policies(Murphy, 2010). Because of these erroneous cost variations, different levels of costs get associated with the same level of insurance protection offered by different insurance companies. This means that purchase of high cost policy do not always confirm additional insurance protection thereby resulting in wastage of the extra dollars paid (McKnight et al., 2012). Thus, in order to avoid such circumstances, it is necessary to understand the advantages or benefits of interest adjusted cost method over traditional cost method and this thesis is expected to pave for the same. Thesis statement It is important to accumulate and disseminate detailed ideas regarding the concepts of traditional cost methods and interest adjusted cost methods of calculating cost of life insurance so that the advantages and disadvantages of one over the other can be comprehended on the part of policy holders in an efficient manner and cost methods associated with highest levels of advantages can be applied so as to make sure minimum loss and maximum advantage from a life insurance policy. Purpose of the paper The main purposes of the paper are to communicate the advantages of the interest adjusted cost method over traditional cost method to the users of insurance policy and to educate purchasers of life insurance policies on how to deal with a life insurance agent in the process of purchasing life insurance policies. Overview of the paper This thesis covers case study summary and the theoretical and practical discussions on the advantages of interest adjusted cost method of calculating insurance policy cost over traditional cost method. This paper also discusses how clients should assess quality of insurance agents before purchasing insurance policies. Body Background information It has often been observed that due to the presence of erroneous variations in costs of life insurance among comparable life insurance policies considerable amounts of additional costs are incurred on the part of the insurance policy holders for the same amount of insurance protection (Hardy et al., 2007). In other words, costs vary across similar sort of insurance protections offered by different policies of different companies and this most of the times result in incurrence of extra dollars on the part of policy holders (Vogel Blair, 2007). Advantages of interest adjusted cost method over traditional cost method It is important on the part of the clients to assess relative advantages and disadvantages of costing methods and apply the same in a beneficial manner while selecting insurance policies (Maclean, 2009). It is also important on the part of researchers to communicate to the users of insurance policy holders that when it comes to insurance policy cost, interest adjusted cost methods are more accurate that traditional cost methods. This is mainly because of the fact that traditional net cost method used in the process of ascertaining life insurance cost fails to take in to account time value of money and these shows insurance to be free which is false. On the other hand, interest adjusted cost methods are more accurate in the sense that they take in to account time value of money through application of interest factor to each cost element (Zartman Price, 2011). Again, in the context of traditional cash value life insurance policies, data on annual rates of return are not easily avai lable to the consumers. This drawback is absent in the case of interest adjusted life insurance policies as the same make yearly rates of return easily available to the customers. Insurance industry and insurance agents It goes without saying that selling is always a tough job and selling life insurance is even tougher (Huebner Black, 2006). In the insurance industry of today, competition is extremely fierce and under such circumstances, insurance agents are made to sell insurance policies without providing them with sufficient training. Moreover, they are made to work under immense sales pressure so that they can accomplish targeted sales without fault. This is not only the case with new agents but also with mature agents. Under such circumstances, some agents resort to dishonest sales practices such as misrepresentation of insurance to clients or recommendation of policies to clients that maximise commission and do not fulfil client needs (Zartman Price, 2011). In this regard, it is important to educate the clients about the matter that interest adjusted insurance costing method is more accurate than traditional method and an agent calculating cost of a proposed insurance policy through tradition al costing method can be considered incompetent and unacceptable. To be ideally educated, an insurance agent must be a Chartered Financial Consultant (ChFC) or Chartered Life Underwriter (CLU) or Chartered Financial Planner. Moreover, he or she must be technically competent and a good advisor (Magee, 2010). Calculations and inferences Computation of annual net cost per $1000 Annual net cost = (tenure of life insurance x annual premium) total dividends for 20 years cash value at the end of 20 years = [(20 x 230) 1613 3620]/ (20 x 10) = - $3.165 The above figure of annual net cost is indicative of the fact that the insures will have to pay $3.165 to the client each year for every $1000 of life insurance coverage bought on the part of the client(Gerber, 2008). No insurance company is expected to accept this as this a loss go the company. Computation of annual surrender cost index per $1000 Annual surrender cost index = [(tenure of life insurance x Annuity due factor for 20 years) accumulated value of dividends for 20 years cash value at the end of 20 years] / annuity due factor for 20 years x 100 = [(230 x 34.719) 2353 - 3620)] / (34.719 x 10) = $0.58 The above figure of annual surrender cost index indicates that if the stated policy is held on the part of the client for 20 years and then surrendered, it would cost $0.58 per $1000 per year(Gaines, 2012). Computation of annual net payment cost index per $1000 Annual net payment cost index = [(tenure of life insurance x Annuity due factor for 20 years) accumulated value of dividends for 20 years] / annuity due factor for 20 years x 100 = [(230 x 34.719) 2353)] / (34.719 x 10) = $1.622 The above figure of annual net payment cost index indicates that if the stated policy is held by the client for 20 years and then the client continue to hold it or died, it would cost $1.62 per $1000 per year(Gaines, 2008). Conclusion Lessons learned An educationally competent insurance agent is a Chartered Financial Consultant (ChFC) or Chartered Life Underwriter (CLU) or Chartered Financial Planner (Raynes, 2013). In addition to having proper educational qualifications, an insurance agent needs to be technically competent and a good advisor. Interest adjusted cost method is more appropriate than traditional cost method because of the fact that the former one takes in to account time value of money(Gaines, 2010). In order for an insurance company to make profit, annual net cost index has to be positive Annual net payment cost index is usually higher than annual surrender cost index (Zartman and Price, 2014) Recommendations A number of recommendations have been given at the end of the thesis. First an insurance clients should take in to account professional qualifications, technical competencies and advisory capabilities of an agent before purchasing a life insurance from him or her. Second an insurance client should make sure that his or her insurance costs are calculated through interest adjusted cost methods and not through traditional cost method as the former one is more efficient than the later one(Gerber, 2008). Third, an insurance company should not make a deal until and unless annual net cost index is positive, otherwise the company would make a loss from the deal. References Cockerell, H. (2005). Insurance. London: English Universities Press. Gaines, P. (2008). Interest-adjusted index. Cincinnati: National Underwriter Co. Gaines, P. (2010). Interest-adjusted index; life insurance payment and cost comparisons. Cincinnati. Gaines, P. (2012). Cost facts on life insurance: interest-adjusted method. Cincinnati: National Underwriter Co. Gerber, H. (2008). Life insurance mathematics. Berlin: Springer. Hardy, E., Huebner, S., Michelbacher, G. and Mudgett, B. (2007). Insurance. New York: Alexander Hamilton Institute. Huebner, S., Black, K. (2006).Life insurance. Englewood Cliffs, N.J.: Prentice-Hall. Maclean, J. (2005).Life insurance. New York: McGraw-Hill. Maclean, J. (2009). Life insurance. New York: McGraw-Hill. Magee, J. (2010). Life insurance. Homewood, Ill.: R.D. Irwin. McGill, D. (2013). Life insurance. Homewood, Ill.: R.D. Irwin. McKnight, R., Reuter, J., Zitzewitz, E. (2012).Insurance as delegated purchasing. Cambridge, Mass.: National Bureau of Economic Research. Murphy, S. (2010).Investing in life. Baltimore, Md.: Johns Hopkins University Press. Raynes, H. (2013). Insurance. London: Oxford University Press. Sneyd, M. (2013).Insurance. New York: Prentice Hall. Vogel, R., Blair, R. (2007).Health insurance administrative costs. Washington, D.C.: U.S. Department of Health, Education, and Welfare, Social Security Administration, Office of Research and Statistics. Zartman, L. and Price, W. (2014). Life insurance. New Haven: Yale University Press. Zartman, L., Price, W. (2011).Life insurance. New Haven: Yale University Press.