What is trade-off in Economics?


Trade off

Tradeoffs involve making choices in policy making wherein there is a compromise on one goal to achieve another goal. It is a way of balancing among desirable goals. In order of one’s preference and priority, it may be necessary to forego one alternative over the other.

For example, consider yourself travelling from City-A to City-B and you have the options of taking a bus or an aeroplane. If you choose bus, you may save some money but it comes at the expense of time. But say for any time-related or comfort reasons, you prefer an aeroplane, you end up spending more money.

Take a look at both cases. Aren’t we trading off between money and time here?

This is just like Reserve Bank’s attempt to moderate inflation but some amount of growth is sacrificed here.

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