Free Rider Case Study

Great Essays
1. Case study:
Public Finance Principle: The Free Rider Problem
The free rider problem is when an individual or entity allows others to pay for a benefit or service they enjoy without paying for it themselves (Rosen & Gayer, 2014).
The topic is Health Insurance. In the article Duska concludes that there is an unclear notion to the right of health insurance (Duska, 2008). There are millions of people that do not have health insurance, and some of them do not, as they chose not to purchase it (Duska, 2008). Based on the fact that people have the “right to health care” and they chose not to purchase insurance, this in effect becomes a free rider issue. Having the right to health care and choosing not to purchase health insurance puts others
…show more content…
This is relevant because setting market rates and targets for inflation is a key finance principle used by the government. Market interest rates help drive or control the level of inflation. In this article it is pointed out that rates have been low for an extremely long period of time and even at close to full employment, inflation remains near 1% (Ip, 2016). The situation here is what to do with rates. Inflation and interest rates are linked. Typically when rates rise, the economy slows and inflation is lowered. At this time, rates don’t have much room to go, or to be lowered. The article states that it is necessary to raise rates and it may be wise to allow the inflation rate to be higher to maintain the growth or allow the economy to continue to grow. Although raising the rates is not what we would typically see from the Feds when the inflation rate is so low, there is no room to lower the rates and employment is at a strong level. Ip (2008), states “John Williams, president of the Federal Reserve Bank of San Francisco, made the case for a higher inflation target in a bank newsletter.” The reason for raising the inflation target is not to slow the economy but more for the need to reset the rates and repair the Fed’s ammunition when necessary to lower rates. By raising the inflation target it would likely allow the rates to …show more content…
Businesses purchase insurance policies to transfer their risk of property damage losses and liability to the insurance company (Baker, 2016). There are many types of insurance policies different firms or businesses purchase, depending on the type of business they are in. This is also an efficient practice for an individual. I personally have purchased additional life insurance to help support my family in the event of my death. Understanding the policy I have in place through my employer and the amount of debt I carry with my house, I have additional protection to help alleviate those expenses, or to lower the risk of many family suffering a loss of our assets in the event of my death. I carry home owners insurance to limit my risk of a loss in the event something were to happen to my home, as well as car insurance that mitigates the chance of my sustaining a loss of my vehicle (or the money I have invested in my vehicle) if it were to be damaged in an accident. It is important for a business to purchase insurance to protect itself from a loss. In my personal life, it is equally important for me to carry insurance to protect myself and my family from suffering a significant

Related Documents

  • Improved Essays

    The Dinner Party Economics by Eveline Adomait and Richard Maranta provides a deep understanding of the macroeconomic environment and provides an opportunity to analyse the recent decisions of the Ontario government. The Ontario government recently released a new budget that states it will once again run a deficit for the following fiscal year (Morrow, 2016). This will be the tenth time in the last thirteen years that the government has spent more money that it has received from tax payers. With the continuation of borrowing, and the growth of the deficit in the upcoming years, the province is expected to reach the highest level of sub national debt across the entire globe. Currently the net debt of the province sits at about $296.1 billion…

    • 1248 Words
    • 5 Pages
    Improved Essays
  • Improved Essays

    Freedom Ride Case Study

    • 266 Words
    • 2 Pages

    The Freedom Rides was a campaign, lead by Aboriginal student Charles Perkins, that highlighted and brought international attention to the racism, poor state of Aboriginal health, education and housing in western and coastal New South Wales towns. This event was significant in the history of civil rights for Indigenous Australians. The campaign consisted of a group formed at the University of Sydney called Student Action for Aborigines (SAFA), who travelled around NSW towns protesting the rights for Aboriginal people, aiming to decrease the socially discriminatory barriers existing between the Aboriginal and white community. They were witness to violence and serious discrimination as they protested and picketed at community segregation areas…

    • 266 Words
    • 2 Pages
    Improved Essays
  • Improved Essays

    There have been many instances in which our country united states of America has issues when dealing with the rights of the majority and miniorty groups throughout its histoy. However since this very birth of this nation the issues of slavery still carried for years to come. In spite of this problem the united states of America had a solution this problem which will become the thirteen amendment; this amendment will abolish slavery as a whole. But many of these slaves that became free from this amendment still had no rights after this event. Yet there will be a group of brave pedestrains who will stand for the rights for those who cannot speak up for themselves.…

    • 576 Words
    • 3 Pages
    Improved Essays
  • Improved Essays

    Freedom Rides Analysis

    • 879 Words
    • 4 Pages

    What were the freedom rides? When racism was witnessed by numerous Australians, as issues experienced by different nations for example: South Africa or the southern part of the USA, University of Sydney pupils chose to expose the truth of racism in Australia and the lives for Aboriginal individuals in New South Wales. Charles Perkins, from Alice Springs was one of just two Aboriginal students at the University at the time, was chosen leader for the Student Action for Aborigines (SAFA). Encouraged by the United States 1961 Freedom Rides, they got on the freedom buses on 12 February, 1965 and visited through territorial towns, for example, Walgett, Gulargambone, Kempsey, Bowraville and Moree to indicate more extensive Australia the experience…

    • 879 Words
    • 4 Pages
    Improved Essays
  • Improved Essays

    Employers choose to self-insure because it allows them to save the profit margin that an insurance company adds to its premium for a fully-insured plan. Ideally Aetna would want everyone to be on fully-insured plans to maximize its profits. In fully-insured plans Aetna bears the actuarial/financial risk. In self-insured plans, employer pays Aetna a fixed administrative fees.…

    • 545 Words
    • 3 Pages
    Improved Essays
  • Decent Essays

    The Fed will tighten interest rates (or increase rates) to stave off inflation. Conversely, the Fed will ease (or…

    • 178 Words
    • 1 Pages
    Decent Essays
  • Improved Essays

    The first freedom ride happened on may 4th 1961. The freedom riders intended to test the supreme court decision in boyton v. Virginia in 1960. Which had declared segregation in interstate transport systems like bus and train stations including the buses and trains unconstitutional. They got a lot of jail terms which got more volunteers for the freedom rides.…

    • 505 Words
    • 3 Pages
    Improved Essays
  • Improved Essays

    Costs should be controlled as spending as there is continued demand for insurance, increases fall on the consumer, limited health benefits from employers due to affordability, and taxes continue to be raised to offset the rising costs (Shi & Singh, 2015). People are always in need of health insurance and therefore insurance companies may take advantage of this. Employers are not able to afford to continued cost of insurance as premiums rise which reflect on consumers not being able to afford insurance as these increases fall on the employees. Taxes are continually increased to help mitigate the budget deficit. If these are not contained or another approach found to be better may slowly take a higher percentage of their wages which lowers the…

    • 692 Words
    • 3 Pages
    Improved Essays
  • Superior Essays

    Strengths State Farm insurance is a well-known insurance company that has been around for nearly a decade. Many insurances companies have a limited life and cannot adapt to the rapidly high demanded market within the financial service industry. For a company to last as long as State Farm and with as much success is the result of many strengths. State Farms services almost seem endless when it comes to what policy holders can insure. People enjoy having options when possible and that’s exactly what State Farm has to offer.…

    • 1078 Words
    • 5 Pages
    Superior Essays
  • Improved Essays

    The statistics regarding the Fed’s 4 main goals give us a better understanding where the money was allocated. Price stability is the first goal of the Fed. The inflation rate in 2016 decreased from 3.8% in 2008 to 1.3%.…

    • 432 Words
    • 2 Pages
    Improved Essays
  • Improved Essays

    The school had given her an ultimatum, if Jessie didn’t improve his grades and attitude they would have no choice, he would be sent away. One night Jesse overheard his mother crying and walked into her bedroom. She had just found out Lisa was pregnant and what kind of things she had been doing. Watching his mom in such pain and disappointment Jesse kissed her on the cheek expressing that he had also caused her several problems, and for that he was sorry. He never wants to see her like this again, especially since dad had done enough damage.…

    • 2075 Words
    • 9 Pages
    Improved Essays
  • Improved Essays

    The inflation rate is defined by the financial dictionary as, “A measure of how fast a currency loses its value. That is, the inflation rate measures how fast prices for goods and services rise over time, or how much less one unit of currency buys now compared to one unit of currency at a given time in the past” (Inflation Rate). Many of the concerns are considering that raising the minimum wage would increase inflation rates. “The main causes of inflation are either excess aggregate demand (economic growth too fast) or cost push factors (supply-side factors)” (Causes of Inflation).…

    • 1495 Words
    • 6 Pages
    Improved Essays
  • Decent Essays

    Health Care Coverage

    • 285 Words
    • 2 Pages

    It also protects you from the higher value medical bills each year. You have to buy a health insurance for you and your family before any unexpected illness happens to you or them. Health insurances are many, varied and consist of many plans. In my opinion, the ideal one is the…

    • 285 Words
    • 2 Pages
    Decent Essays
  • Improved Essays

    Chapter 17 Summary

    • 496 Words
    • 2 Pages

    Here we learned that central bank key operations are to stabilize prices, in other words, they are tasked with the ability to control inflation. Secondly, they were to provide economic growth and create employment. This seems to insinuate conflict in their mandate because, even when these two goals are in the long run compactible, in the short-term, it was difficult to accomplish. As we have learned, these two responsibilities force central banks to decide of either to raise interest rates or slow or even stop MS growth to stave off inflation or should it decrease interest rates or speed up MS growth to induce companies and consumers to borrow, thereby stoking employment and growth? These questions pose a dilemma, not just to central banks, but to the economy in general.…

    • 496 Words
    • 2 Pages
    Improved Essays
  • Superior Essays

    Housing Market Bubble Case Study

    • 1229 Words
    • 5 Pages
    • 10 Works Cited

    During this expansion of the market Federal Reserve Chairman Alan Greenspan was worried that the country could face a recession or server downturn in the economy. From this information the Federal Reserve began cutting interest rates down to as low as 1%, and kept them at this low rate until 2004. This was a policy taken by the Federal Reserve to keep money in the economy through cash and savings. The interest rate was also kept low, because those with the adjustable mortgage rates, which fluctuate with the market. This also kept more spending in the economy to keep the economy afloat according to the economic principals behind this decision.…

    • 1229 Words
    • 5 Pages
    • 10 Works Cited
    Superior Essays