In the market, actions known as incentives affect both consumers and producers. Incentives serve as motivational tools that induce both producers and consumers to act in ways that influence market behavior and outcomes.
Explanation
- Incentives motivate producers to produce or supply more or less of a good, depending on the nature of the incentive (such as subsidies or taxes).
- Similarly, incentives influence consumers' purchasing decisions by encouraging them to buy more or less through price changes, sales, or other benefits.
- Therefore, incentives affect both sides in the market, shaping the interaction between supply and demand.
