Chapter 1, Problem 1QFR

To determine

To explain:

The response to be given to an individual if quiz is given by the instructor on the course readings and whether these quizzes are positive or negative incentive.

Explanation of Solution

Positive as well as negative incentives both have influences on people's choices and actions.People's outlooks of awards and punishments vary as they have distinct values. Therefore, an incentive can affect separate individuals in separate ways.Responses to both types of incentives can be predictable since people generally follow their self-interests.

If the instructor gives daily quizzes on course reading, the response of an individual would be both positive and negative incentives. This is because initially to some point of time it would be encouraging and can prove to be as positive incentive. On the contrary, after long time period, it canbe felt like punishment and can hence be a negative incentive. However, a lot depends on an individual on the way the person considers the daily quiz.

Economics Concept Introduction

Incentive:Incentives are the value offered to someone in order to assist in the decision making. Incentives are mainly offered as rewards for encouragement. Few incentives make an individual feel better off with punishment,while few make them worse off during taking actions. Former category is called positive incentive and later is called negative incentive.