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When you are considering renting an apartment or house, almost all landlords will require that you pay a refundable security deposit. The need for landlords to charge a security deposits reflects

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When landlords require such of their tenants then that action is known as Moral Hazard

Moral Hazard:

  • Refers to the risk a person will not act in the best way towards something because it is protected
  • Can also happen when the person using the thing in question does not own it

Tenants do not own a house so they might act however they want in it such that it gets damaged. Requiring a security deposit ensures that this damage is minimized because any damage is paid from the security deposit.

In conclusion, landlords do this as a result of moral hazard.

Find out more at https://brainly.com/question/22355283.

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