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What is a trade-off?

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alyssa210 | Student, Undergraduate | eNotes Newbie

Posted May 23, 2013 at 10:15 PM via web

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What is a trade-off?

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pohnpei397 | College Teacher | (Level 3) Distinguished Educator

Posted May 23, 2013 at 11:51 PM (Answer #1)

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In economics, the term “trade-off” is usually associated with the term “opportunity cost.”  Opportunity cost is what you give up in order to do some particular thing.

The basic fact of economics is that resources are limited and human wants are unlimited.  What this means is that we can never have everything we want.  Whenever we do one thing, we have to give up something else.  For example, let us say that I want to spend $15 on some singer’s new CD.  In order to do that, I have to give up the chance to do something else with that $15.  Perhaps I would have liked to get myself a really big pizza with lots of toppings.  That is my opportunity cost for buying the CD.

Looking at that definition of opportunity cost, you can see why it makes sense to call these “trade-offs.”  I got the CD, but I had to trade the chance to get the pizza.  Thus, a trade-off is a term that is sometimes used interchangeably with the term “opportunity cost.”

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