Principles of Microeconomics, 7th Edition

Published by South-Western College
ISBN 10: 128516590X
ISBN 13: 978-1-28516-590-5

Chapter 1 - Part I - Ten Principles of Economics - Questions for Review: 4

Answer

Policymakers should consider that people respond to incentives because they can increase overall productivity in the economy by rewarding people for hard work.

Work Step by Step

People respond to incentives. In other words, people often base their behavior on how they think a particular action will be punished or rewarded. For example, if a worker knows that he/she will receive a large bonus for working hard, he/she will be more likely to work harder.
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