Preliminaries | Concept of Trade-Offs

Discuss the concept of trade-offs from an economic theory perspective, and give three examples of trade-offs that a consumer, a worker or a firm might make.

Your Answer:

Resources are scarce, and so when consumers, businesses and workers choose to do one thing with their time and resources, they are choosing not to do other things. 

Consumers must choose which goods or services they will buy and which they will forgo. 

Workers decide which type of work they will do, or even if they will work at all. Workers might also choose not to work or work less in order to pursue additional training. 

Firms must decide which market they will produce goods or services for, and how much they will produce. When market conditions change and profitability changes, they may choose to leave or enter a market.

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Source: Pindyck / Rubinfeld, Microeconomics, 7th edition, Pearson

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