Incentives Matter

Supply

The amount of some good or service a producer is willing to supply at each price.

Black market

An illegal market where goods are traded without government regulation.

Normal Goods

Goods for which demand increases as consumer income rises.

Luxury Goods

Goods that gain in value and get higher demand levels as they rise in price, often associated with higher income levels.

Shortage

A situation where the demand for a good or service exceeds its supply, often leading to increased prices.

Labor

The physical and mental effort used in the production of goods and services, typically compensated by wages.

Tax Incentives

Reductions in tax that the government makes to encourage spending on certain items or activities

Tax Rebates

Incentives that take certain actions, like investing in solar energy. They are refunds on taxes paid, aimed at stimulating consumer spending and investment.

Demand

The amount of money of a good or service that consumers are willing to pay

Equilibrium

Where demand equals supply, and represents the process of price discovery in the marketplace

Surplus

Occurs when supply exceeds demand, leading to excess inventory in the market.

Incentives

A reward or a cost resulting from specific behavior

Capital

Financial assets or resources used for investment or production.

Subsidies

Financial assistance provided by the government to encourage production or consumption of certain goods and services.

Capitalism

based on individual initiative and favors market mechanisms over government intervention

Socialism

based on government planning and limitations on private control of resources