1. Role of Producers & Consumers in a Market Economy EPF2a. Incentives

2. Essential question: What is an incentive? 2

3. Incentives Definition: something that makes a person try or work hard or harder Incentives influence people’s behavior 3

4. Essential question: How do incentives influence behavior? 4

5. Incentives influence behavior by: A positive incentive is a reward or other inticement that ENCOURAGES a behavior Ex. prizes, wages A negative incentive is a penalty that DISCOURAGES behavior Ex. library fine, parking ticket 5

6. Essential question: How do consumers, producers, workers, savers, investors & citizens respond to incentives? 6

7. Value and/or lower price is an incentive for consumer 7

8. Profit is an incentive for producers 8

9. Pay and benefits are incentives to workers 9

10. Interest earned is an incentive for savers 10

11. Capital gain is an incentive for investors (ex. buying at $10 & selling at $15 = a $5 capital gain) 11

12. Citizens have an incentive to vote for politicians who share their views 12

13. Interest groups have an incentive to seek to influence politicians to vote in ways that benefit their group. 13