Economic incentives are rewards or penalties that influence the behavior of individuals and businesses. They can take various forms, such as tax breaks, subsidies, or fines, and are designed to encourage certain actions or discourage others. For example, a government might offer a tax credit to promote the use of renewable energy sources, motivating people to invest in solar panels. These incentives play a crucial role in shaping economic decisions. When businesses see potential profits from a new product, they may invest more resources into its development. Conversely, high taxes on pollution can push companies to adopt cleaner technologies, aligning their practices with broader societal goals.