Moral Hazard and Cross Price Elasticity

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Added on 2021/04/17

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The provided assignment involves two separate problems. The first problem deals with the concept of moral hazard, where one party under business procedure assumes extra risks that may affect other parties negatively. This is illustrated through the example of a salesperson's compensation. The second problem involves calculating cross price elasticity of a product, which is found to be 1.5 and is positive, indicating that increasing the price of one product can increase the demand for its substitute product.

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Moral Hazard and Cross Price Elasticity

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