Week 4 Flashcards
(5 cards)
1
Q
What is the Principal Agent Problem?
A
Where one person takes more risks because someone else bares the consequences
2
Q
What is Moral Hazard?
A
Lack of incentive to guard against risk, you’ll be protected from its consequence e.g insurance
3
Q
Schumpters model of dynamic competition
A
- Forward looking comp
- Innovation
- Process of creative destruction
4
Q
Neoclassical model of perfect competition
A
- Equilibrium Price
- Supply and Demand are equal
- Firms have no influence over price
5
Q
What is Creative Destruction?
A
Old business collapse creating new successful business.
Consequence of innovation.
