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Trade-off

Definition

A trade-off occurs when a decision or action involves giving up one thing in order to gain another. It often represents a compromise or a choice between two options that have both benefits and drawbacks.

Analogy

Imagine you have $10 to spend, but there are two things you really want: a new video game for $5 and a delicious ice cream sundae for $5. You can only choose one because of limited funds, so you must make a trade-off by deciding which item is more important to you at that moment.

Related terms

Opportunity Cost: Opportunity cost is the value of what is given up when choosing one option over another. In our previous analogy, if you choose the video game, the opportunity cost would be not having the ice cream sundae.

Cost-Benefit Analysis: Cost-benefit analysis is an evaluation method used to compare the costs and benefits of different alternatives before making a decision. It helps determine whether the benefits outweigh the costs or vice versa.

Sustainable Development: Sustainable development aims to meet present needs without compromising the ability of future generations to meet their own needs. It seeks economic growth while considering social equity and environmental protection as integral components.