- People face trade-offs - There is a saying that "there is no such thing as a free lunch". This is true in economics, because everything we do/decide involves sacrificing something. This is the trade-off. For example, I'm torn whether to study Ma20 or Acc10. I could decide to study for Ma20 and lose Acc10 study time, or study Acc10 and lose Ma20 study time. There is always something given up. Even if you decide that you will split your time between the two, the study time will still be lesser.
In the big scale, the society also experiences trade-offs. Efficiency means that the society is getting the most out of its scarce resources and equity is the property of distributing economic property fairly among the members of the society. When government policies are designed, these two rules conflict. 'You cannot please everybody'. For example, the concept of the individual income tax. When the rich members of the society are asked to contribute more money to give to the government as support to people in need, it reduces the reward for working hard, therefore people will work less and produce few economic goods and services. In other words, when the government tries to cut the economic pie into more equal pieces, the efficiency of a society decreases; the pie gets smaller. - The Cost of Something Is What You Give Up To Get It - Because people trade face-offs, people make decisions. Making decisions involve comparing the benefits and costs of the alternative courses of action. But in many cases, the cost of some action is not as obvious as it might first appear. The opportunity cost of an item is what you give up to get that item.
1. People face trade-offs
2. The cost of something is what you give up to get it.
I am now going to study for Calculus. Good day to you too. :D
