Economics of Informationa) Provide an intuitive explanation of the.pdf

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Economics has a notoriously bad reputation among students. They assume it will be dry, boring, and not relevant to their lives. They also think it\'s hard because the course content must be understood rather than memorized. Why do you think economics gets a bad rap? Solution Economics is a very difficult subject to understand, students generally do not like to choose this subject in main stream. This subject made bad reputaion in students due to the following reasons-.

Educação

Economics of Information
a) Provide an intuitive explanation of the Principal-Agent problem and discuss any mechanisms
used to mitigate the problem. You should use the business owner-manager problem as an
illustration.
b) Provide and intuitive explanation of the Adverse Selection problem and discuss its
implications. You should use the health insurance industry as an illustration.
Solution
A.
In the corporates business owners are the shareholders and they don't look themselves day to
day operations. For the day to day operation they hire people. These employees have assymetric
inforation right and better forcast of company operations, so, these employees have responsibility
to work in the best interest of shareholders but instead of doing that they use the information for
their own personal benefit.
Example: Hiring is going on in the orgnasition and the manager who is looking on hiring process
hire to someone who is his friend instead of hiring to someone who is most suited for the
position.
To mitigate the problem organisation should imlement for best corporate governnance practice
and hire those who have strong personal and business intension.
B.
Suppose an insurance firm offered health insurance to the general public. It is likely to have the
highest take up rate amongst unhealthy people. People who don

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Each student in a class size n was born in a year with 365 days, and each reports his or her birth date(month and day, but not year). a) How many ways can this happen? -The answer is 360^n but why? b) How many ways can this happen with no repeated birth dates? c)What is the probability of no matching birth dates? d) In a class of 23 students, what is the probability of at least one birth date Need help here, the text book + class notes don\'t seem to help me much on this problem. Solution it should be 365^n since each person birthday can fall on any day out of 365 b)the answer is 365!(factorial) i.e., 365*364*363.......*1 since no repetations are allowed c)the probability is 364/365* 363/364*362/363.....hence =1/365 d)P = 1 - (365P23/365^23) = .7063 here P represents permutation.

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