Question

What is an example of a negative incentive for producers

Answer 1

An example of a negative incentive for producers is the sharp increase in production costs. Producers are the one who manage the production costs and even the production budget. Anything that relates the production department is entitled to the management of production producers.

There is what we called positive and negative incentives and both of these can affect consumers and producers. Positive incentives are those situations which will give a certain outcome that will benefit the producers, for example, during the peak season there will be a high demand of products, and this gives the chance of producers to demand a higher price from the consumers, in this situation, there will be a big chance of increase sales.  A sharp increase in production costs is a loss for the producers.  If there will be an increase in production costs, the budget will be greatly affective and even though it is not a peak season, there’s a big chance also to increase prices which we know, consumers are not fond of.