Incentives on individuals.
Read and reflect on following information below.
People respond predictably to positive and negative incentives.
Rewards are positive incentives that make people better off.
Penalties are negative incentives that make people worse off.
Both positive and negative incentives affect people’s choices and behavior.
People’s views of rewards and penalties differ because people have different values.
Therefore, an incentive can influence different individuals in different ways.
Responses to incentives are predictable because people usually pursue their self-
Changes in incentives cause people to change their behavior in predictable ways.
Incentives can be monetary or non-monetary.
Acting as consumers, producers, workers, savers, investors, and citizens, people
respond to incentives in order to allocate their scarce resources in ways that provide
the highest possible returns to them.
Extrinsic vs. Intrinsic Incentives
There are two types of incentives:
Extrinsic incentives encompass receiving a reward or avoiding punishment. Economic
incentives are extrinsic motivators, in which a reward, like money, will motivate
someone to accomplish a goal or task.
In contract, intrinsic motivation is when a person is motivated to do something for its