Fun Facts O Ducks, like humans, have different regional accents when communicating with each other O In 1992, instead of engaging in a messy legal battle over the use of a slogan, the CEOs of Southwest Airlines and Stevens Aviation simply arm-wrestled for it O Less than a year before President Lincoln’s assassination, his oldest son was saved by Edwin Booth after he fell from a moving train

Incentives Unit I: Economics Basics Lesson IV

Quick Activity O Name a time that you feel you put in extra effort because you thought you could get a lot more out of it O Name a time that you tried to get a person to do something by promising them something

Incentives O An incentive is something that motivates an individual to perform an action O The study of incentive structures is central to the study of all economic activities O In terms of decision making, co-operation, and competition within a larger institutional structure

Incentives O It doesn’t matter who they are, people respond to incentives. O Incentives are rewards in place that make people want to behave a certain way. O Incentives may be negative or positive O Incentives could be in the form of money or other enticing things

Incentives O A strong incentive is one that accomplishes the stated goal O A weak incentive is any incentive below this level O To accomplish things you want done in economics you must give the consumer or the producer incentives, without them they would have no reason to do what you ask

Incentives-Prices O Consumers respond to low prices O When prices go down, consumers consume/buy more O Producers respond to high prices O When prices go up, producers produce/sell more

Incentives-Money O Workers work for wages O When wages go up, workers tend to work more O Savers put their money in banks to earn interest O When interest rates go up, savers tend to save more O Investors risk money to earn a profit O When they get a positive return on investment they will invest more.

Incentives-Government O Citizens tend to participate in government more when they feel a candidate shares their values and/ or concerns O Interest groups have an incentive to seek to influence politicians to vote in ways that benefit their group

Quiz Review 1) What is the difference between a good and service? a) Goods are tangible items, while services are intangible 2) What is scarcity and what does it force us to do? a) Not being able to have all the goods and services one wants due to limited resources and unlimited wants- we have to make choices 3) What is the difference between a shortage and scarcity? a) A shortage is man made and will change over time while scarcity is naturally occurring and more cannot be made 4) What is the name for the value of the next best alternative given up? a) Opportunity Cost 5) You actually got up this morning when your alarm went off, what was the opportunity cost of getting up? a) More Sleep

Quiz Review 6) What is the name for the benefit received for consuming one more unit? a) Marginal utility 7) What is the name of the price paid for each additional unit? a) Marginal cost 8) Choices should be made when the marginal benefit is ________ than the marginal cost a) Greater 9) Wages are an incentive for who? a) Workers 10) Prices are incentives for what two groups? a) Consumers and Producers