An incentive is something that motivates you to act in a certain way. Economic incentives are offered to encourage people to make certain choices or to behave in a certain way. They usually involve money, but they can also involve goods and services. A positive incentive is a reward or other enticement that encourages a behavior. For example, suppose you want to buy a new shirt for your date on Friday night. You have found two that are similar, but one is on sale. The lower sale price is usually a positive incentive to buy the less expensive product. A negative incentive is a penalty that discourages a behavior.

Suppose the state government has decided to add a new tax on soda. This new tax will increase the cost of soda. This is an example of a negative incentive that is used to discourage people from buying soda. Sometimes an incentive can be positive for one person and negative for another person. How can that be? Well, since we all have different tastes and preferences, we all want and enjoy different things.

Incentives

What types of incentives do businesses use to get you to choose their product over the competition? You will explore these incentives in this interactivity. Click the player button to begin.

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Consumers, producers, workers, savers, investors, and citizens also respond to incentives. For example,

• interest earned is an incentive for savers
• capital gain is an incentive for investors
• citizens have an incentive to vote for politicans who share their views
• interest groups have an incentive to seek to influence politicians to vote in ways that benefit their group

Did you know that businesses use market research to find out what consumers want and need? Then they use advertising to target the consumers that they think are most likely to buy their products. Advertisements try to influence your buying decisions by showing you the latest trend, by discrediting a competitor’s product, or by telling you how their product is the best one on the market. Advertising tells you that if you buy a particular product you will be better looking, run faster, or be more popular. As consumers, we respond to the advertisements and incentives that best fit our lifestyles. Some of the things that can affect your choices include the quality of the product, your tastes and preferences, the price of the product, the package design, and marketing promotions.

Advertising

In this interactivity, you will learn how advertising influences purchasing decisions. Click the player button to begin.

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The 4 P's of Marketing

In this interactivity, you will examine the 4 P's of Marketing, also known as the marketing mix. Click the player button to begin.