Incentive

An incentive is something, that induces action or motivates effort, such as the fear of punishment or the expectation of reward.

The incentive that impels a man to act is always some uneasiness.

How people respond to incentives
Incentives motivate people to action. People will do more of something as the cost falls, and they will do less of it as the cost rises (the law of demand). Similarly, they will try to supply more of something that gets more remunerative and less of something that gets less remunerative (the law of supply). Prices are some of the most important incentives in economics. The price is the number of dollars that have to be traded for something ($2 for a cup of coffee, for example). Market prices emerge from the interactions of buyers and sellers.

Links

 * Incentives 101 by Sandy Ikeda, November 2014
 * What is the incentive problem under socialism? (audio) with Murray N. Rothbard
 * Economic Incentives And Welfare by Murray Rothbard (Chapter 13 from Making Economic Sense)
 * Government vs. Natural Resources by Murray Rothbard (Chapter 24 from Making Economic Sense)
 * Can States Buy Business? by Peter T. Calcagno, April 1999
 * Can States Buy Business? by Peter T. Calcagno, April 1999
 * Can States Buy Business? by Peter T. Calcagno, April 1999