Trade-off

Definition

A trade-off refers to the decision-making process of giving up one thing in order to gain something else. It involves making choices because resources are limited and individuals or societies cannot have everything they want.

Related terms

Opportunity Cost: This term refers to the value of the next best alternative that is forgone when making a choice.

Production Possibilities Frontier (PPF): This term refers to a graphical representation showing all possible combinations of goods and services that an economy can produce given its resources and technology.

Marginal Analysis: This term refers to examining the additional benefits versus costs when making decisions, considering small incremental changes.