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FEDERAL RESERVE BANK OF ST. LOUIS ECONOMIC EDUCATION
© 2021, Federal Reserve Bank of St. Louis. Permission is granted to reprint or photocopy this lesson in its entirety for educational purposes, provided the user credits the Federal Reserve Bank of St. Louis, www.stlouisfed.org/education. 1
Incentives Are All Around Us
Lesson AuthorAndrea Caceres-Santamaria, Federal Reserve Bank of St. Louis
Standards and Benchmarks (see page 18)
Lesson DescriptionStudents play a game to experience gaining the reward that comes with positive incentives and paying the penalty that comes with negative incentives. Varieties of incentives are intro-duced to discuss types of incentives, what behavior they are trying to encourage or discour-age, and who creates these incentives. After applying their gained knowledge of incentives, students are assessed by creating an incentive following a step-by-step guide and then pre-senting it to the class.
Grade Level9–12
ConceptsBenefits
Choice
Costs
Economic incentives (positive and negative)
ObjectivesStudents will be able to
• distinguish between negative and positive incentives;
• define economic incentives, choice, benefits, and costs;
• identify and explain the particular behavior that an incentive is trying to encourage or dis-courage; and
• identify the costs and benefits of a decision that is made based on the incentive ordisincentive.
Incentives Are All Around Us
© 2021, Federal Reserve Bank of St. Louis. Permission is granted to reprint or photocopy this lesson in its entirety for educational purposes, provided the user credits the Federal Reserve Bank of St. Louis, www.stlouisfed.org/education. 2
Compelling QuestionWhat types of incentives does society create that may change people’s behavior in predictable ways?
Time Required45–60 minutes
Materials • Slides 1–6
• Handout 1: Letter Choice, with enough copies to provide one card for each student. Cut out each card so that it can be folded in half along the middle with the letter A on one side and the letter B on the opposite side.
• Handout 2: Incentives Game Instructions, one copy for each pair of students
• Handout 3: Incentives (Draw Pile), one copy cut apart for each pair of students (each deck contains 12 incentives)
• Handout 4: Response Cards for Player 1, one copy for each pair of students. To differenti-ate the cards for player one and player two, all the sets for player one in each group can be copied on colored paper.
• Handout 5: Response Cards for Player 2, one copy for each pair of students. To differenti-ate the cards for player one and player two, all the sets for player two in each group can be copied on colored paper that is different from the color used for the player one cards.
• Handout 5a: Answer Key to Incentives Game, one copy for the teacher
• Handout 6: Closure, one copy for each pair of students
• Handout 6a: Closure Answer Key, one copy for the teacher
• Handout 7: Assessment, one copy for each pair of students
• Blank paper for each pair of students
• Colored pencils, markers, or crayons for each pair of students
• Enough beans (any type is fine) for each student to have 10 and each pair of students to have 30
• Snack-size plastic zip bags for each student
• One small paper plate for each pair of students
Incentives Are All Around Us
© 2021, Federal Reserve Bank of St. Louis. Permission is granted to reprint or photocopy this lesson in its entirety for educational purposes, provided the user credits the Federal Reserve Bank of St. Louis, www.stlouisfed.org/education. 3
Preparation• 10 beans inside the snack-size plastic bags for each student
• 30 beans on a paper plate for each pair of students
Procedure1. Give each student a letter choice card from Handout 1: Letter Choice.
2. Display Slide 2. Click through each type of incentive and have students hold up their choice cards, either A or B, after you pose each question. As students display their choices, have a few students share why they made that particular choice.
3. Explain that incentives are perceived benefits that encourage certain behaviors. Some incen-tives involve money. Discuss what types of behaviors the following incentives are trying to encourage or discourage:
• Why would parents offer to pay their kids for good grades? (Answers will vary but could include “as an incentive for them to do well in school and do their homework.”)
• What is the incentive to study for a test? (Answers will vary but could include “to earn a good grade,” “to increase an overall grade in a class,” “to avoid decreasing an overall grade in a class,” or “to demonstrate that you understand the content.”)
• What is the incentive for a server to be friendly and attentive to the customer? (Answers will vary but could include “to earn a higher tip,” “to earn a raise,” “to not get fired,” or “to enjoy their job.”)
• What behavior would threatening drivers with a $500 ticket for speeding prevent? (Answers will vary but could include “it might prevent drivers from speeding” or “it could act as an incentive for drivers to drive at the speed limit.”)
4. Explain that these and the incentives in the opening activity cause people to behave in certain ways. In general, people respond to incentives in predictable ways. Thus we can encourage or discourage behaviors through the incentives we offer.
5. Display Slide 3. Positive incentives are rewards that encourage behaviors that make people better off, and there may be a monetary or measurable reward for doing so.
6. Display Slide 4. Negative incentives (disincentives) are penalties that are intended to dis-courage behaviors that make people worse off, and there may be a monetary penalty that must be paid or some other measurable penalty for doing so.
Incentives Are All Around Us
© 2021, Federal Reserve Bank of St. Louis. Permission is granted to reprint or photocopy this lesson in its entirety for educational purposes, provided the user credits the Federal Reserve Bank of St. Louis, www.stlouisfed.org/education. 4
7. Every decision that people make involves weighing the costs (things unfavorable to a decision-maker) and benefits (things favorable to a decisionmaker) of each option. Positive incentives increase the benefits of one alternative relative to the costs. For example, receiving extra points or money for good grades increases the benefits of studying or doing homework. These incen-tives make the option of studying more attractive, which encourages people to choose that option. Negative incentives increase the costs of one option relative to the benefits. For exam-ple, incurring a loss of driving privileges for not being home at the appointed time increases the cost of staying out past curfew. This makes the option less attractive and may discourage people from choosing that option. Therefore, people respond to incentives. Incentives are usually intended to help people behave in a predictable way.
8. Display Slides 5–6. Explain that economic incentives, in particular, involve a financial benefit or cost; therefore they can be either positive or negative. Review the examples of economic incentives.
9. Explain that some incentives are put in place by governments at the local, state, or national level. Tax breaks, speeding tickets, and littering fines are examples of incentives created by the government. Other incentives are created by businesses to encourage consumers to purchase certain goods and services. These incentives include buy-one-get-one-free sales, offering two items for a low price, and other discounts.
10. Explain that schools also have several incentives in place that are positive or negative. Discuss examples of incentives in your school, along with the costs and benefits of each. Some exam-ples mentioned may include
• cell phone policies;
• tardy policies;
• recognition and gifts for good grades and/or good behavior; and
• late work policies.
11. Explain that students will be playing a game with various incentives that students and consumers may face. Some incentives are economic incentives, and some are incentives similar to what they may face in school.
12. Divide students into pairs. Give each pair of students one copy of Handout 2: Incentives Game Instructions, one set of cards from Handout 3: Incentives (Draw Pile), one set from Handout 4: Response Cards for Player 1, and one set from Handout 5: Response Cards for Player 2. Provide a bag of 10 beans for each student and 30 beans on a small plate for each pair of students.
13. Refer students to the directions in Handout 2 and review them as follows:
Incentives Are All Around Us
© 2021, Federal Reserve Bank of St. Louis. Permission is granted to reprint or photocopy this lesson in its entirety for educational purposes, provided the user credits the Federal Reserve Bank of St. Louis, www.stlouisfed.org/education. 5
• Place the cards from the draw pile (Handout 3) in the center between the two players, along with the small plate with 30 beans. Each player should also have 10 beans to start the game.
• The beans represent the penalty or reward for each incentive. The beans provide an expe-rience of gaining and losing, which is what people have to consider when responding to incentives. In real life, money and other non-monetary incentives are used in place of beans, as is the case in the examples discussed previously.
• Each player should have one deck of cards (Handouts 4 and 5).
• Begin the game by having the younger of the two players draw a card from the center pile. The player reads the card aloud. Both players look at their cards and see which response to the incentive matches the one read from the draw pile. For example, if the card reads “Get caught speeding, and you get one expensive ticket,” the players will search for the response card that indicates whether they got caught speeding or not. The players should read their response cards aloud.
• Follow the instructions on the card. If you are rewarded, take the indicated amount of beans from the center; if you are penalized, you add the indicated amount to the center, taking away from your beans.
• Take turns drawing cards from the center pile and reading the incentives aloud until every card has been drawn.
• The player with the most beans when all the incentives cards have been drawn wins the game!
14. Allow students time to play the game. Circle around the room to each group to ensure that the game is being played correctly.
15. Debrief the game by discussing the following:
• What are some examples of positive incentives in the game? (Discount on insurance for good grades, paycheck for working)
• What are some examples of negative incentives in the game? (Losing points for turning an assignment in late, fines for late library books, fines for littering)
• What did losing beans or having to pay an amount of beans represent in the game? (Losing or paying beans represented the cost of being penalized—for example, if you were caught speeding or not bringing your own shopping bag to the store.)
• How were the beans used to represent a positive incentive or reward? (Earning beans was the reward—for example, going to work and getting paid, doing your homework, or following the speed limit.)
• In general, do you think incentives work? (Answers will vary, but students should see that, in general, incentives work to encourage or discourage behaviors.)
Incentives Are All Around Us
© 2021, Federal Reserve Bank of St. Louis. Permission is granted to reprint or photocopy this lesson in its entirety for educational purposes, provided the user credits the Federal Reserve Bank of St. Louis, www.stlouisfed.org/education. 6
• Name a positive incentive that your parents use to encourage you to keep your room clean or do other work at home. (Answers will vary but may include “not getting in trou-ble,” “having more time to do the things you like,” or “getting an allowance.”)
• Name a negative incentive that your parents use to discourage you from skipping class or not being home on time. (Answers will vary but may include “getting grounded,” “having less time on electronics,” or “having items taken away for a period of time.”)
Closure16. Give a copy of Handout 6: Closure to each pair of students. Review the instructions for the
activity. Allow students a few minutes to work together to complete the activity. Once students have completed the activity, review the answers. Refer to the teacher key Handout 6a: Closure Answer Key.
• Optional: Project the handout under a document camera and choose one student at a time to come up and fill in the table as the other students provide responses.
Assessment17. Have students work in the same groups as they did for the game. Distribute a copy of
Handout 7: Assessment; crayons, markers, or colored pencils; and a blank sheet of paper. Review the instructions for the assessment with the class. Allow time for the students to work and then have students present their group-created incentive.
Incentives Are All Around Us
© 2021, Federal Reserve Bank of St. Louis. Permission is granted to reprint or photocopy this lesson in its entirety for educational purposes, provided the user credits the Federal Reserve Bank of St. Louis, www.stlouisfed.org/education. 7
Handout 1: Letter Choice
A BA B
Incentives Are All Around Us
© 2021, Federal Reserve Bank of St. Louis. Permission is granted to reprint or photocopy this lesson in its entirety for educational purposes, provided the user credits the Federal Reserve Bank of St. Louis, www.stlouisfed.org/education. 8
Handout 2: Incentives Game Instructions
• Place the cards from the draw pile (Handout 3: Incentives) in the center between the two players, along with the small plate with the 30 beans. Each player should also have 10 beans to start the game.
• The beans represent the penalty or reward for each incentive. The beans provide an experience of gaining and losing, which is what people have to consider when responding to incentives. In real life, money and other non-monetary incentives are used in place of beans, as is the case in the examples discussed previously.
• Each player should have one deck of cards (Handout 4: Response Cards for Player 1 and Handout 5: Response Cards for Player 2).
• Begin the game by having the younger of the two players draw a card from the center pile. The player reads the card aloud. Both players look at their cards and see which response to the incentive matches the one read from the draw pile. For example, if the card reads “Get caught speeding, and you get one expensive ticket,” the players will search for the response card that indicates whether they got caught speeding or not. The players should read their response cards aloud.
• Follow the instructions on the card. If you are rewarded, take the indicated amount of beans from the center; if you are penalized, you add the indicated amount to the center, taking away from your beans.
• Take turns drawing cards from the center pile and reading the incentives aloud until every card has been drawn.
• The player with the most beans when all the incentives cards have been drawn wins the game!
Incentives Are All Around Us
© 2021, Federal Reserve Bank of St. Louis. Permission is granted to reprint or photocopy this lesson in its entirety for educational purposes, provided the user credits the Federal Reserve Bank of St. Louis, www.stlouisfed.org/education. 9
Handout 3: Incentives (Draw Pile)
Go
od
stu
den
t d
isco
un
t!
Year
ly s
avin
gs
o
n c
ar in
sura
nce
fo
r g
oo
d g
rad
es
(B o
r ab
ove
)
Get
cau
gh
t sp
eed
ing
an
d
you
get
on
e ex
pen
sive
tic
ket.
50-p
oin
t p
enal
ty
for
turn
ing
h
om
ewo
rk in
late
Payc
hec
k fo
r w
ork
ing
at
the
Ho
t D
og
Hav
en
Ho
no
r R
oll
B
uff
ett
Lun
ch
Payi
ng
th
e w
ater
b
ill p
ast
the
du
e d
ate
will
co
st
you
a la
te f
ee.
A f
ull
rid
e to
a
2-ye
ar c
olle
ge
fo
r g
rad
uat
ing
w
ith
a 3
.5 o
r ab
ove
GPA
Get
cau
gh
t lit
teri
ng
an
d
you
get
on
e ex
pen
sive
tic
ket.
Dis
cou
nt
on
h
ealt
h in
sura
nce
if
yo
u g
o f
or
an
ann
ual
ch
ecku
p
The
gro
cery
sto
re
char
ges
fo
r ea
ch
pla
stic
bag
—u
nle
ss y
ou
b
rin
g y
ou
r o
wn
.
Lib
rary
bo
oks
sh
ou
ld a
lway
s b
e re
turn
ed o
n t
ime.
Ev
ery
wee
k th
e b
oo
k is
late
mea
ns
you
are
fin
ed.
If y
ou e
arn
a pa
ssin
g sc
ore
on a
co
llege
-leve
l exa
m,
the
scho
ol w
ill
wai
ve t
he e
xam
fe
e. If
you
do
not
pass
, you
will
ow
e th
e sc
hool
the
ex
am f
ee.
Incentives Are All Around Us
© 2021, Federal Reserve Bank of St. Louis. Permission is granted to reprint or photocopy this lesson in its entirety for educational purposes, provided the user credits the Federal Reserve Bank of St. Louis, www.stlouisfed.org/education. 10
Handout 4: Response Cards for Player 1
You
gra
du
ated
w
ith
a 3
.2 G
PA.
No
fu
ll ri
de
to
a 2
-yea
r
colle
ge
for
you
! Lo
se 6
bea
ns.
You
ear
ned
a D
in
ch
emis
try
and
ar
t. Y
ou
lose
th
e g
oo
d s
tud
ent
dis
cou
nt.
Pa
y 4
bea
ns.
No
sp
eed
ing
ti
cket
fo
r yo
u—
you
dri
ve t
he
spee
d li
mit
!
Earn
5 b
ean
s
as a
rew
ard
.
You
fo
rgo
t
to s
ched
ule
yo
ur
ann
ual
ph
ysic
al.
The
hea
lth
in
sura
nce
co
mp
any
incr
ease
s yo
ur
insu
ran
ce
cost
s. Y
ou
pay
10
bea
ns.
Ho
mew
ork
is a
p
rio
rity
fo
r yo
u!
You
alw
ays
turn
it
in o
n t
ime.
Yo
u g
et 2
bea
ns
as
a r
ewar
d.
You
love
to
bu
y fr
oze
n v
egg
ies,
b
ut
you
fo
rgo
t yo
ur
reu
sab
le
gro
cery
bag
. Yo
u p
ay 2
bea
ns
for
the
3 b
ags
yo
u h
ad t
o u
se.
You
stu
die
d
very
har
d f
or
a co
lleg
e-le
vel e
xam
an
d p
asse
d!
Yo
u e
arn
4 b
ean
s.
Ho
no
r R
oll
B
uff
et L
un
ch
her
e yo
u c
om
e!
You
go
t so
me
tuto
rin
g a
nd
yo
ur
gra
des
wen
t u
p!
Get
2 b
ean
s.
You
wo
rked
th
is
wee
k, a
nd
th
at
pay
chec
k su
re
is s
wee
t!
Earn
10
bea
ns.
Uh
oh
. Yo
u p
aid
th
e w
ater
bill
5
day
s af
ter
it
was
du
e.
Pay
up
8 b
ean
s
as t
he
pen
alty
.
You
are
cau
gh
t th
row
ing
a f
ast-
foo
d w
rap
per
on
th
e g
rou
nd
. An
o
ffice
r fi
nes
yo
u!
Pay
a 5-
bea
n fi
ne
for
litte
rin
g.
Ret
urn
ing
lib
rary
b
oo
ks o
n t
ime
is
wh
at y
ou
are
al
l ab
ou
t.
Get
2 b
ean
s.
Incentives Are All Around Us
© 2021, Federal Reserve Bank of St. Louis. Permission is granted to reprint or photocopy this lesson in its entirety for educational purposes, provided the user credits the Federal Reserve Bank of St. Louis, www.stlouisfed.org/education. 11
Handout 5: Response Cards for Player 2
You
stu
dy
har
d
in h
igh
sch
oo
l an
d g
rad
uat
e
wit
h a
3.7
GPA
. G
et 6
bea
ns.
You
ear
ned
an
A
in c
hem
istr
y an
d
art.
Yo
u k
eep
th
e g
oo
d s
tud
ent
dis
cou
nt.
Ea
rn 4
bea
ns.
Wh
o s
aid
go
ing
20
mile
s o
ver
th
e sp
eed
lim
it
is s
afe?
Yo
u g
et
cau
gh
t an
d
tick
eted
fo
r sp
eed
ing
!
Pay
up
5 b
ean
s.
You
sch
edu
led
yo
ur
ann
ual
p
hys
ical
. Th
e h
ealt
h in
sura
nce
co
mp
any
gra
nts
yo
u a
n a
nn
ual
d
isco
un
t. Y
ou
ea
rn 1
0 b
ean
s.
Wh
o h
as t
ime
fo
r h
om
ewo
rk?
No
t yo
u;
you
r p
rog
ress
re
po
rt s
ho
ws
a
50-p
oin
t p
enal
ty.
You
lose
2 b
ean
s.
You
love
to
bu
y fr
oze
n v
egg
ies
and
rem
emb
ered
to
bri
ng
yo
ur
insu
late
d r
eusa
ble
b
ag. Y
ou
ear
n
2 b
ean
s.
Un
fort
un
atel
y,
you
did
no
t
do
wel
l on
th
e co
lleg
e-le
vel e
xam
. Pa
y u
p 4
bea
ns.
Ho
no
r R
oll
B
uff
et L
un
ch
her
e yo
u c
om
e!
You
go
t so
me
tuto
rin
g a
nd
yo
ur
gra
des
wen
t u
p!
Get
2 b
ean
s.
You
wo
rked
th
is
wee
k, a
nd
th
at
pay
chec
k su
re is
sw
eet!
Bu
t yo
u
dec
ided
to
ca
ll in
on
e d
ay
pre
ten
din
g t
o b
e si
ck. Y
ou
co
uld
h
ave
earn
ed m
ore
. Ea
rn 8
bea
ns.
You
pai
d
the
wat
er b
ill
on
tim
e!
Get
8 b
ean
s.
You
are
alw
ays
sure
to
th
row
yo
ur
tras
h a
way
p
rop
erly
. No
lit
teri
ng
fin
e fo
r yo
u!
Get
5 b
ean
s.
Ther
e’s
that
lib
rary
b
oo
k th
at w
as d
ue
two
mo
nth
s ag
o!
Pay
the
fin
e o
f 2
bea
ns.
Incentives Are All Around Us
© 2021, Federal Reserve Bank of St. Louis. Permission is granted to reprint or photocopy this lesson in its entirety for educational purposes, provided the user credits the Federal Reserve Bank of St. Louis, www.stlouisfed.org/education. 12
Handout 5a: Answer Key to Incentives Game (page 1 of 2)
Handout 3: Incentives Handout 4: Response Cards Handout 5: Response Cards
Good student discount! Yearly savings on car insurance for good grades (B or above)
You graduated with a 3.2 GPA. No full ride to a 2-year
college for you! Lose 6 beans.
You study hard in high school and graduate with a 3.7 GPA.
Get 6 beans.
Get caught speeding and you get one expensive ticket.
You earned a D in chemistry and art. You lose the good
student discount. Pay 4 beans.
You earned an A in chemistry and art. You keep the good
student discount. Earn 4 beans.
50-point penalty for turning homework in late
No speeding ticket for you—you drive the speed limit! Earn
5 beans as a reward.
Who said going 20 miles over the speed limit is safe? You get caught and ticketed for speeding! Pay up 5 beans.
Paycheck for working at the Hot Dog Haven
You forgot to schedule your annual physical. The health
insurance company increases your insurance costs. You pay
10 beans.
You scheduled your annual physical. The health insurance
company grants you an annual discount. You earn 10
beans.
Honor Roll Buffett Lunch
Homework is a priority for you! You always turn it in on time. You get 2 beans as a
reward.
Who has time for homework? Not you’re your progress
report shows 50-point penalty. You lose 2 beans.
Paying the water past the due date will cost you a late fee.
You love to buy frozen veggies, but you forgot your
reusable grocery bag. You pay 2 beans for the 3 bags you
had to use.
You love to buy frozen veggies and remembered to bring
your insulated reusable bag. You earn 2 beans.
A full ride to a 2-year college for graduating with a 3.5 or
above GPA
You studied very hard for a college-level exam and
passed! You earn 4 beans.
Unfortunately, you did not do well on the college-level exam. Pay up 4 beans.
Get caught littering and you get one expensive ticket.
Honor Roll Buffet Lunch here you come! You got some
tutoring and your grades went up! Get 2 beans.
Honor Roll Buffet Lunch here you come! You got some
tutoring and your grades went up! Get 2 beans.
Incentives Are All Around Us
© 2021, Federal Reserve Bank of St. Louis. Permission is granted to reprint or photocopy this lesson in its entirety for educational purposes, provided the user credits the Federal Reserve Bank of St. Louis, www.stlouisfed.org/education. 13
Handout 3: Incentives Handout 4: Response Cards Handout 5: Response Cards
Discount on health insurance if you go for an annual
checkup
You worked this week, and that paycheck sure is sweet!
Earn 10 beans.
You worked this week, and that paycheck sure is sweet!
But you decided to call in one day pretending to be sick. You could have earned more. Earn
8 beans.
The grocery store charges for each plastic bag—unless you
bring your own.
Uh oh. You paid the water bill 5 days after it was due. Pay up
8 beans as the penalty.
You paid the water bill on time! Get 8 beans.
Library books should always be returned on time. Every
week the book is late means you are fined.
You are caught throwing a fast food wrapper on the
ground. An officer fines you! Pay a 5 bean fine for littering.
You are always sure to throw your trash away properly. No littering fine for you! Get 5
beans.
If you earn a passing score on a college-level exam, the school will waive the exam fee. If you do not pass, you will owe the
school the exam fee.
Returning library books on time is what you are all about.
Get 2 beans.
There’s that library book that was due two months ago! Pay
the fine of 2 beans.
Handout 5a: Answer Key to Incentives Game (page 2 of 2)
Incentives Are All Around Us
© 2021, Federal Reserve Bank of St. Louis. Permission is granted to reprint or photocopy this lesson in its entirety for educational purposes, provided the user credits the Federal Reserve Bank of St. Louis, www.stlouisfed.org/education. 14
Handout 6: Closure In
cen
tive
Posi
tive
or
neg
ativ
e?
Wha
t ty
pe o
f be
havi
or is
the
in
cent
ive
tryi
ng t
o
enco
urag
e or
di
scou
rage
?
Who
wou
ld c
reat
e an
in
cent
ive
like
this
? Th
e go
vern
men
t, a
busi
ness
, or a
sch
ool?
Eco
no
mic
ince
nti
ve?
Ind
icat
e (Y
) fo
r ye
s an
d (
N)
for
no
.
Goo
d st
uden
t di
scou
nt!
Year
ly s
avin
gs o
n ca
r in
sura
nce
for
good
gr
ades
(B o
r ab
ove)
Get
cau
ght
spee
ding
an
d yo
u ge
t on
e ex
pens
ive
ticke
t.
50-p
oint
pen
alty
for
tu
rnin
g ho
mew
ork
in
late
Payc
heck
for
wor
king
at
the
Hot
Dog
Hav
en
Hon
or R
oll B
uffe
tt
Lunc
h
The
groc
ery
stor
e ch
arge
s fo
r ea
ch p
last
ic
bag—
unle
ss y
ou b
ring
your
ow
n.
A f
ull r
ide
to a
2-y
ear
colle
ge f
or g
radu
atin
g w
ith a
3.5
or
abov
e G
PA
Incentives Are All Around Us
© 2021, Federal Reserve Bank of St. Louis. Permission is granted to reprint or photocopy this lesson in its entirety for educational purposes, provided the user credits the Federal Reserve Bank of St. Louis, www.stlouisfed.org/education. 15
Handout 6a: Closure Answer KeyIn
cen
tive
Posi
tive
or
neg
ativ
e?
Wha
t ty
pe o
f be
havi
or is
the
in
cent
ive
tryi
ng t
o
enco
urag
e or
di
scou
rage
?
Who
wou
ld c
reat
e an
in
cent
ive
like
this
? Th
e go
vern
men
t, a
busi
ness
, or a
sch
ool?
Eco
no
mic
ince
nti
ve?
Ind
icat
e (Y
) fo
r ye
s an
d (
N)
for
no
.
Goo
d st
uden
t di
scou
nt!
Year
ly s
avin
gs o
n ca
r in
sura
nce
for
good
gr
ades
(B o
r ab
ove)
Posi
tive
Enco
urag
ing
stud
ents
w
ho d
rive
to d
o w
ell
in s
choo
l. A
s an
in
cent
ive,
the
y sa
ve o
n ca
r in
sura
nce.
A b
usin
ess,
per
haps
in
colla
bora
tion
with
sc
hool
s
Yes,
bec
ause
the
re is
a
finan
cial
ince
ntiv
e
Get
cau
ght
spee
ding
an
d yo
u ge
t on
e ex
pens
ive
ticke
t.N
egat
ive
Dis
cour
agin
g pe
ople
fr
om s
peed
ing
by
asso
ciat
ing
it w
ith a
hi
gh c
ost.
Loca
l gov
ernm
ents
in
a ci
ty w
ould
get
to
geth
er w
ith t
he
loca
l pol
ice
offic
e to
cr
eate
it.
Yes,
bec
ause
the
re is
a
finan
cial
cos
t in
volv
ed
50-p
oint
pen
alty
for
tu
rnin
g ho
mew
ork
in
late
Neg
ativ
eIt
is a
dis
ince
ntiv
e fo
r tu
rnin
g ho
mew
ork
in
late
. Sc
hool
s N
o, t
here
is n
o fin
anci
al b
enefi
t or
co
st
Payc
heck
for
wor
king
at
the
Hot
Dog
Hav
enPo
sitiv
e
Enco
urag
ing
peop
le
to g
o to
wor
k by
of
ferin
g th
em t
he
ince
ntiv
e of
ear
ning
m
oney
.
Busi
ness
es p
ay p
eopl
e fo
r th
eir
wor
k.Ye
s, b
ecau
se t
here
is a
fin
anci
al in
cent
ive
Hon
or R
oll B
uffe
tt
Lunc
hPo
sitiv
eEn
cour
agin
g st
uden
ts
to g
et g
ood
grad
esSc
hool
s
No,
the
re is
no
imm
edia
te fi
nanc
ial
bene
fit o
r co
st t
o th
e st
uden
t
The
groc
ery
stor
e ch
arge
s fo
r ea
ch p
last
ic
bag—
unle
ss y
ou b
ring
your
ow
n.
Neg
ativ
e
Enco
urag
ing
cust
omer
s to
brin
g th
eir
own
reus
able
ba
gs a
nd s
ave
on
was
te
Busi
ness
es a
nd, i
n so
me
plac
es,
gove
rnm
ents
Yes,
bec
ause
the
re is
a
finan
cial
cos
t
A f
ull r
ide
to a
2-y
ear
colle
ge f
or g
radu
atin
g w
ith a
3.5
or
abov
e G
PAPo
sitiv
e
Enco
urag
ing
stud
ents
to
do
wel
l dur
ing
thei
r 4
year
s of
hig
h sc
hool
an
d ea
rn a
sch
olar
ship
Typi
cally
sch
ools
alo
ng
with
gov
ernm
ents
, su
ch a
s th
e st
ate’
s D
epar
tmen
t of
Ed
ucat
ion.
Yes,
the
re is
a fi
nanc
ial
bene
fit o
f sa
ving
s on
co
llege
cos
ts
Incentives Are All Around Us
© 2021, Federal Reserve Bank of St. Louis. Permission is granted to reprint or photocopy this lesson in its entirety for educational purposes, provided the user credits the Federal Reserve Bank of St. Louis, www.stlouisfed.org/education. 16
Handout 7: Assessment (page 1 of 2)
Working with the same partner as you did when you played the game, you will create a positive or negative incentive. Think of a behavior within your school or society in general that the group believes could be persuaded to change through some type of incentive. Use this sheet to create your incentive or disincentive. Follow the directions in each step carefully.
Step 1: Discuss as a group what behavior you would like to possibly change. Fill in the spaces below with three ideas that your group comes up with, and then circle your final decision.
• ______________________________________________________________________________
• ______________________________________________________________________________
• ______________________________________________________________________________
Step 2: Discuss and write down at least three different incentives (positive or negative) that could result in the predicted behavior. Make sure that the reward or penalty is explained or defined clearly. Indicate whether the incentive is monetary or non-monetary. Circle the final choice the group decided on.
• ______________________________________________________________________________
• ______________________________________________________________________________
• ______________________________________________________________________________
Step 3: Explain why the incentive is positive or negative.
_____________________________________________________________________________________
_____________________________________________________________________________________
_____________________________________________________________________________________
_____________________________________________________________________________________
Step 4: Every incentive involves making a choice between some options. Explain these options here.
_____________________________________________________________________________________
_____________________________________________________________________________________
_____________________________________________________________________________________
_____________________________________________________________________________________
Incentives Are All Around Us
© 2021, Federal Reserve Bank of St. Louis. Permission is granted to reprint or photocopy this lesson in its entirety for educational purposes, provided the user credits the Federal Reserve Bank of St. Louis, www.stlouisfed.org/education. 17
Handout 7: Assessment (page 2 of 2)
Step 5: On a blank sheet of paper. Come up with an illustration that explains your incentive. The illustration should clearly show what the incentive is, and if there is a reward or penalty. You will share your incentive with the class.
Incentives Are All Around Us
© 2021, Federal Reserve Bank of St. Louis. Permission is granted to reprint or photocopy this lesson in its entirety for educational purposes, provided the user credits the Federal Reserve Bank of St. Louis, www.stlouisfed.org/education. 18
Standards and Benchmarks
Voluntary National Content Standards in Economics
Content Standard 1: Scarcity
• Benchmark: Grade 8
3. The choices people make have both present and future consequences.
• Benchmark: Grade 12
1. Choices made by individuals, firms, or government officials are constrained by the resources to which they have access.
Content Standard 4: Incentives
• Benchmark: Grade 8
1. Responses to incentives are usually predictable because people normally pursue their self- interest or deviate from their self-interest in consistent ways.
2. Changes in incentives usually cause people to change their behavior in predictable ways.
3. Incentives can be monetary or non-monetary, or both.
• Benchmark Grade 12
1. Acting as consumers, producers, workers, savers, investors, and citizens, people respond to incentives in order to allocate their scarce resources in ways that provide them the highest possible net benefits.