Upon buying a car with airbags indy begins to drive recklessly. This is an example of the

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Social Studies

Santos Gallagher

19 August, 19:26

Upon buying a car with airbags indy begins to drive recklessly. This is an example of the

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Ivan Beltran · Answer 1

Upon buying a car with airbags Indy begins to drive recklessly. This is an example of moral hazard problem.

Explanation:

A moral hazard problem occurs when an individual or party in a contract decides to take risk due to the assurance that the consequences of such kind of a risk shall not affect them. In the above context, Indy takes the risk of driving recklessly which might result to a road accident. However, she does this intentionally since she knows her life is covered and might be rescued by the air bag in case of an accident.