Trade-offs
Definition
Trade-offs refer to the choices individuals, businesses, and governments make when they give up one thing in order to gain another. It involves sacrificing one option for another due to limited resources.
Analogy
Imagine you have $10 and you want to buy a new video game and a pizza. However, you can only afford one of them. You have to make a trade-off by choosing between the video game or the pizza because you don't have enough money for both.
Related terms
Opportunity Cost: The opportunity cost is the value of the next best alternative that is forgone when making a choice.
Scarcity: Scarcity refers to the limited availability of resources compared to unlimited wants and needs.
Production Possibilities Curve (PPC): The PPC shows all possible combinations of goods and services that can be produced given available resources and technology.
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