Trade-offs
Definition
Trade-offs refer to the choices individuals or societies make when they give up one thing to gain something else. It involves sacrificing one option for another due to limited resources.
Analogy
Imagine you have $20 and you have to decide between buying a new video game or going out for dinner with friends. You can't do both because of limited money, so you have to make a trade-off by choosing one over the other.
Related terms
Marginal Analysis: Examining the additional benefits versus additional costs when making decisions.
Efficiency: Achieving maximum output from available resources without waste.
Comparative Advantage: When an individual or country has a lower opportunity cost in producing a particular good compared to others.
"Trade-offs" appears in:
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Practice Questions (3)
Why are trade-offs necessary in decision-making when faced with scarcity and limited resources?
What is one of the trade-offs involved in a command economic system?
A firm decides to reduce its output in order to lower its per-unit costs. What potential risks or trade-offs should the firm consider before making this decision?
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