Incentive function
What Incentive function means in Economics A-Level, as defined for AQA.
Definitions of Incentive function
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Reference: AQA
The role of a price change in acting as an incentive to producers to change their behaviour, such as reducing output.
Higher prices offer the prospect of increased revenue and profit, encouraging firms to supply more of a product.
Topics that use Incentive function
- How markets and prices allocate resources (AQA A-Level)
- The determination of equilibrium market prices (AQA A-Level)
Related terms
- Price mechanism
- Signalling function
- Asymmetric information
- Ceteris paribus
- Disequilibrium
- Economic efficiency
- Economic incentives
- Economic shocks
Using Incentive function in the exam
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