What are they? How do we respond to them? Incentives What are they? How do we respond to them?

Incentives What are they? Anything (a reward or punishment) that forces consumers, businesses and governments to take an action Avoid an action Postive incentives make you better off Negative incentives make you worse off What are some incentives to get you to study? What about incentives to go to work? What about incentives to stop texting in class?

Examples of (positive) incentives PBIS tickets for helping out in class Bonus points for winning a vocabulary review game Rewards benefits for downloading and signing up for a company’s app Free time Raise at work Your ideas?

Predicted response: People will obey traffic laws. Is this a positive or negative incentive? Predict how the individual or firm will respond… Individuals caught breaking traffic laws face fines or other penalties. Predicted response: People will obey traffic laws. Why? To avoid fines, jail time, losing their license.

Is this a positive or negative incentive Is this a positive or negative incentive? Predict how the individual or firm will respond… Starbucks offers bonus stars for card holders for purchasing drinks from 2PM – 5PM. Predicted response: People will purchase more drinks between 2PM and 5PM daily. Why? To earn more bonus stars and receive free drinks and food faster.

Bonus question: Why does Starbucks offer customization of their drinks?

Is this a positive or negative incentive Is this a positive or negative incentive? Predict how the individual or firm will respond… A subsidy is given to firms that develop new products which improve public health or safety. Predicted response: Firms will develop and produce new and better products to improve health and safety. Why? They are being paid to do it. They get to keep the money earned from the sale of their product and it cost them less to make it. Better profits!

Is this a positive or negative incentive Is this a positive or negative incentive? Predict how the individual or firm will respond… Firms who pollute are fined thousands of dollars each time they do it. Predicted response: Firms will cut back on pollution Why? To avoid fines and loss of income.