Discussion

Incentives is one of the most famous example in economic. Is the idea of Demand Curve.
Demand is when a thing or groceries gets more expensive, people will buy less and when the
thing or groceries get cheap people will buy more of it.
The main ground in economic believe strongly is The Law of Demand is credible. even to
noneconomic. In fact, The law of demand is deep – seated in our everyday needs. Sellers buy
more apples when they are in season and price is low .This is the evidence to law of demand
only at lower in season price are consumers inclined to buy the large sum of amount
available. Similarly , when people get knows mango orchard had burned. The mango price
will rise to reduce the amount demand to the smaller amount available in market. This is the
law of demand.

figure 1.1 shows the quantity of durian fruit demanded by Han Boon at various price levels
over a period of one month.
Price (RM) Quantity Demand (KG) Point
5 4 a
4 6 b
3 8 c
2 10 d

.
Based on table 1.1 at the price of RM5 per kilo, 4 kg of durian is requested by Han Boon.
When the price of durian decreases to RM 4, RM3 RM2 per kilo, the greater the quantity of
durian requested by Han Boon, it increases to 6kg, 8 kg and 10kg respectively.

How people respond to incentives :

Incentives in the economy are factors that can influence consumer purchasing behaviour. they can
be preferred by the government or businesses such as taxes when purchasing luxury cars .

1. Switching to inferior products: When a price of a thing rising continuously but people
need the same amount quantity of products (groceries or dresses) can make it to them
same amount of quantity but turn to low quality and it is called as inferior product
For an example, Kleiny paid to his staff per month salary is RM 12000 to RM16000
and they use. Mercedes - Benz Currently his company has gone to bankrupt and his
staff sold their cars .Now they willing used cars. Consumers will prefer cheaper cars
when their income decrease. As a consumer’s income increase the demand for cheap
cars will decrease while demand for luxury cars will increase so cheap cars are
inferior products.

2. Change of habits: For inelastic goods (constant demand is less or more) the same
price fluctuations as petrol and electricity consumers change their habits to go up or
down in price.
For example, if the price of petrol increases the consumer tries to use less petrol. For
an example, government announced petrol per litre RM 2 increase to RM 3.
Consumers will try to use petrol less by using public transportation and they will walk
and go to shops those shops are near to housing area to purchase groceries

3. Interest rates : Interest rates act as an incentives for business to invest and consumers
can borrow money from bank. When bank have low interest rates, Consumers will
borrow money with bank with low interest rates to invest money.
For an example, MS Shilpa borrow money with Maybank RM63000 (3% interest
rate) on 1st July. She was paid fully on following month. She paid to bank with
interest is RM64890.

Types of incentives : Positive incentive and Negative incentives.

Positive incentives is sellers will reward with money or some sort financial such as providing
discounts, coupons, promotion and etc.
For an example, Hailey’s boutique gave Christmas promotion those are purchasing more
than RM400 with them will get promotion ( 20%). MR Joseph bought Christmas dress for
RM480 and get 20% promotion. After deduction from promotion Joseph paid RM 400.
Negative incentives is make you to pay money worstly likewise fines, fees and etc.
For an example Police fines MR John RM 500 because use phone while driving. RM 500
fines is negative incentive.