Grade 3-5

Economic Incentives in Our Community

Updated: December 8 2015,

Students will identify positive and negative economic incentives used in their communities to encourage people to make CHOICES beneficial to the community. Students will recognize that not all incentives convince all people, since people have different views and values.


Illustrate the idea of incentives by having students draw on their own experiences with how incentives have influenced them by asking such questions as: Have you ever purchased a kids meal just to get the toy? Or have you ever purchased a box of cereal because of the prize inside? Next, discuss the following terms with your students:

Economic Incentives are offered to influence our behavior.Cereal

  • Positive economic incentives reward people financially for making certain choices and behaving in a certain way.
  • Negative economic incentives punish people financially for making certain choices and behaving in a certain way.

Let’s learn about Economic incentives in our community!

Teachers should introduce the concept of incentives with the EconEdlink lesson titled "Incentives Influence Us." Before beginning this lesson, do a quick review on incentives, positive incentives, rewards, negative incentives, penalties and how they are used to influence our behavior.

Learning Objectives

  • Understand that incentives are used to encourage and discourage behaviors.
  • Identify economic incentives in the community.
  • Identify positive and negative incentives.
  • Understand that a cost is something you give up when you make a choice.
  • Understand that a benefit is something you receive when you make a choice.
  • Determine if an incentive would influence their behavior and explain why.

Resource List


Activity 1: What Are Economic Incentives?

Economic incentives are offered to encourage people to make certain choices or behave in a certain way. They usually involve money, but they can also involve goods and services.Coupon

Positive economic incentives leave you better off if you do what was asked of you. These incentives benefit you in some way. They reward you with money or some sort of financial gain such as a better price, a free item, or an upgraded item. Coupons, sales, freebies, discounts, and rewards can be positive economic incentives. They are called positive because they are associated with things many people would like to get.

Negative incentives leave you worse off financially by making you pay money. These incentives cost you money. Fines, fees, and tickets can be negative economic incentives. They are called negative because they are things you don't want to get.

Think about It!

Economic Incentives use money to:

  • encourage you
  • persuade you
  • convince you
  • bribe you
  • punish you
  • reward you
  • penalize you
  • influence you

You will only get the economic incentive if you make the required choice or behave in the way that you are asked. You might be influenced by the incentive, but you still must make a choice.

Activity 2: Who Offers Economic Incentives and Why?

Businesses often use economic incentives to encourage people to come and do business with them. Offering incentives is one way to get customers to choose to come and spend money at a business.

  • Restaurants use coupons, buy-one, get-one deals, Kid's Eat Free Night, and other incentives to encourage people to choose their restaurant.
  • Stores offer coupons, sales, discounts, buy-one, get-one free and other incentives to get customers to choose their store.
  • Airlines give frequent flier miles as incentives for people to choose to fly with them.

Government agencies also use economic incentives, but they usually do it to encourage certain behaviors in people. Offering incentives is one way the government tries to get people to behave responsibly.

  • Public libraries use library fines to discourage people from keeping the books too long. Fines encourage people to choose to turn books in on time.
  • Park rangers & park police officers use littering fines as a way to keep people from littering. Fines help people choose not to litter, and this keeps the parks clean.Speeding Ticket
  • Police officers use speeding tickets and parking tickets as incentives to keep people safe. Speeding tickets discourage people from choosing to speed and
    encourage them to drive safely. Parking tickets help keep parking spaces open for the handicapped and fire hydrants clear of unwanted cars. Parking tickets encourage people to choose only legal parking spaces.
  • Police officers give out tickets if babies are not riding in car seats or if people are not wearing their seatbelts. These negative incentives discourage people from
    choosing unsafe behaviors.

Activity 3: Let's See What You Have Learned!

Can you figure out who might be offering the incentive and tell why?
Click here to print up an Economic Incentives Worksheet. [Answers to Worksheet]


Time for Review

Let's see what you have learned about economic incentives.
Click here to play Interactive Tic Tac Toe – What Do You Know?

  1. Review the students' worksheets together. Make sure the students understand the purposes behind the incentives. Students should also discuss whether they or their families have been influenced by incentives and, if so, tell which ones, and how/why they were influenced.
  2. Small Group Work – Using their worksheets, the students should work in small groups to share and compare their created incentives/behavior for the community. Each group should pick one incentive that would really benefit the community and that they think is most likely to work.
  3. Concluding discussion: Bring the class together and have the students share the new incentive designed to solve a problem by encouraging or discouraging a certain behavior in the community. Take a survey: how many students think that their behavior would be influenced by this new incentive.

Think about It!

[NOTE: Tell the students to write their answers to the questions on a sheet of paper and be prepared to share their answers with the rest of the class.]

  • Why do people use incentives? [As a way to influence, convince, encourage, bribe, reward people's choices]
  • Do all incentives work? Why? [No. Not everyone will want the incentive or want the choice, so they won't be or can't be convinced.]
  • Does everyone think and react in the same way about an incentive? Why? [No. People hold various beliefs, values, or views of incentives; thus, no one incentive could satisfy or convince everyone.]
  • Do you think economic incentives work better than non-economic ones? Why? Why not? [Students should be able to back up their opinion on this.]

The discussion should mention that since all people value and believe different things, they will have different reactions to incentives. Therefore, not all incentives will work for all people.


Use the students’ worksheets and participation in small group work and class discussion to determine if they are able to identify positive and negative economic incentives in our community, explain why they are used, and understand that not all incentives will work for all people.