Policy makers consider incentives because they assume that individuals are rational and will respond to incentives by comparing costs and benefits.
Work Step by Step
An incentive is something that encourages an individual to act in a specific way. For example, when a price rises there is smaller incentive for a person to buy the good, and vice versa. This explains why policy makers carefully consider the price of their products - because it will have a direct flow on to the amount of the good that will be consumed.