econs assignment Essay

Submitted By spectreabel
Words: 616
Pages: 3

An economist once said that most economic activities can be summarized as, “People respond to incentives. The rest is commentary” (Mankiw, 2008). This clearly highlights how vital it is the role of incentives in the field of economy. Incentive in short means the factor that benefits a certain group of people and encourages them to an option instead of other alternatives. The reason why people respond to incentives is because it benefits them and they often get more out of the same or lesser opportunity cost. Incentives can often be seen as a form of reward, resulting in a positive impact on people.
Mankiw (2008), a renowned and experienced economist from Harvard University discussed the subject of his personal work incentives. He stated the worth of incentives that kept him working as well as the opportunity to work and earn some extra pay.
In Malaysia, the Cooperatives and Consumerism Minister is attempting to pacify Malaysians by assuring them that the Government is trying their very best to maintain the fuel prices even tough global prices for oil are rising (The Star Online, 2011). If oil prices increase, prices for other goods will also increase as the same time and this would lead on a negative impact for consumers. This indirect incentive that the government is helping to lift is actually allowing better conditions for consumers. On a personal level, an example of incentive in our daily life is the usage of credit cards. Credit card is an important tool in today’s world with the incentives provided including low interest rates and longer term of minimal amount repayment. However, there are many stiff competitions between companies such as Visa, MasterCard and American Express offering the same service and the only way the companies can attract customers is with their incentives. Visa gives a percentage of the purchases as cash back from some cards; accrue points in reward programs from other cards that allow the customers to get merchandise for paying their debts on time (Ramachandran, 2009). Recently, there is a new scheme that allows young adults that are earning less than RM3, 000 a month to own their own home (The Star Online, 2011). These young adults could own homes costing from RM100, 000 to RM200, 000 with 100% loans. My cousin is a newly graduated doctor that soon to be finishing his house manship now could actually afford to get his own home. Before, he couldn’t afford the 10% down payment even after 2 years working. Since this new…