n incentive is something that induces a person to act. Because rational people weigh marginal costs and marginal benefits of activities, they will respond when these costs or benefits change. For example, when the price of automobiles rises, buyers have an incentive to buy fewer cars while automobile producers have an incentive to hire more workers and produce more autos. Public policy can alter the costs or benefits of activities. For example, a luxury tax on expensive boats raises the price and discourages purchases tax on expensive boats raises the price and discourages purchases. Some policies have unintended consequences because they alter behavior in a manner that was not predicted.