ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Responses to incentives are predictable because people usually pursue their self-interest. Changes in incentives cause people to change their behavior in predictable ways. Incentives can be monetary or non-monetary.

Detailed explanation-2: -People Respond to Incentives in Predictable Ways: Incentives are actions, awards, or rewards that determine the choices people make. Incentives can be positive or negative. When incentives change, people change their behaviors in predictable ways.

Detailed explanation-3: -An incentive is something that induces a person to act, such as the prospect of a punishment or a reward. Because rational people make decisions by comparing costs and benefits, they respond to incentives. You will see that incentives play a central role in the study of economics.

Detailed explanation-4: -People respond to incentivesEdit Incentive is something that induces a person to act [by offering rewards or punishments to people who change their behavior]. Because rational people make decisions by comparing costs and benefits, they respond to incentives. Incentives may possess a negative or a positive intention.

Detailed explanation-5: -A well-known Harvard economist, Gregory Mankiw, ranked the idea that people respond to incentives at number four on his “Ten Principles of Economics” list. In his book, The Armchair Economist, Steven Landsburg states that “most of economics can be summarized in four words: ‘people respond to incentives.