Although it’s not always fun, why do you (and most students) attend school each day?

1. Although it’s not always fun, why do you (and most students) attend school each day? What motivates you (and others) to attend school on a regular basis?

3. Lesson 1.2Incentives Essential Question: How do economic, social, and moral incentives influence the decisions of consumers and producers in the marketplace?

4. Incentive Positive Incentive Negative Incentive

5. Incentive Something that induces action or motivates effort. Positive Incentive Negative Incentive

6. Incentive Something that induces action or motivates effort. Positive Incentive AKA “Carrot” Incentive Definition: A reward (or an expected reward) that induces action or motivates effort Examples: Negative Incentive

7. Incentive Something that induces action or motivates effort. Positive Incentive AKA “Carrot” Incentive Definition: A reward (or an expected reward) that induces action or motivates effort Examples: • Lower interest rates can be used to induce people to take out loans (spend more & save less) • Mail-in rebates can be used to induce consumers to buy products Negative Incentive

8. Incentive Something that induces action or motivates effort. Positive Incentive AKA “Carrot” Incentive Definition: A reward (or an expected reward) that induces action or motivates effort Examples: • Lower interest rates can be used to induce people to take out loans (spend more & save less) • Mail-in rebates can be used to induce consumers to buy products Negative Incentive AKA “Stick” Incentive Definition: Fear of a punishment that induces action or motivates effort Examples:

9. Incentive Something that induces action or motivates effort. Positive Incentive AKA “Carrot” Incentive Definition: A reward (or an expected reward) that induces action or motivates effort Examples: • Lower interest rates can be used to induce people to take out loans (spend more & save less) • Mail-in rebates can be used to induce consumers to buy products Negative Incentive AKA “Stick” Incentive Definition: Fear of a punishment that induces action or motivates effort Examples: • Excise taxes (sin taxes) can be used to induce people to consume less of a specific product (cigarettes, alcoholic beverages) • Late fees can be used to induce people to pay their bills on time

10. “Cash for Clunkers” Program July 2009 – August 2009 • Receive a $3,500 or $4,500 voucher from the federal government towards a new vehicle • The trade-in must get less than 18 MPG, must be less than 25 years old, and must be in driving condition • Trade-ins must be scrapped by the dealer (cannot be resold to someone else) • Must purchase a new vehicle or lease it for at least 5 years • New vehicle must get at least 22 MPG • Program ended when $3 billion ran out Video Clip

11. “Cash for Clunkers” Program July 2009 – August 2009 • Receive a $3,500 or $4,500 voucher from the federal government towards a new vehicle • The trade-in must get less than 18 MPG, must be less than 25 years old, and must be in driving condition • Trade-ins must be scrapped by the dealer (cannot be resold to someone else) • Must purchase a new vehicle or lease it for at least 5 years • New vehicle must get at least 22 MPG • Program ended when $3 billion ran out Video Clip How did economists expect the “cash for clunkers” program to revive the failing auto industry and the U.S. economy? What type of incentive is this?

13. What are the economic, social, and moral incentives behind: • Late Day-Care Pickups • Cheating teachers • Cheating Sumo Wrestlers • Bagel Thefts

14. Lesson 1.2 Summarizer Incentives Although it’s not always fun, why do you (and most students) attend school each day? What motivates you (and others) to attend school on a regular basis? *Go back and classify each of these incentives as: positive or negative, economic, social, or moral.