The paper will be based on People face Trade-offs. Also describing in detail, Principle 1 of economics, providing personal examples of people face trade-offs.
Example to use: I work full time and have a 14 year old daughter, which required to me to work part time in order to attend college full time and obtain my degree to make more money and provide a better life for my daughter and myself.
People Face Tradeoffs
People Face Tradeoffs
There are ten principles of economics by Gregory Mankiw. The first principle is People face tradeoffs. The term tradeoff is a situation that involves losing one quality or aspect for something else, which will help in gaining another quality or aspect (Mankiw, Principles of Microconomics., 2016). The word” “People face tradeoffs” means” There is no such thing as a free lunch!” It also means that people should have to give on another thing for people to get one thing or another.
Some of the things that are likely to trade according to the principle include guns vs. butter, food vs. clothing, leisure time vs. working and efficiency vs. equity. A person needs to make a decision, where he ought to trade off one goal against another. Efficiency means that society gets the most that it can from the available scarce resources (Mankiw, Principles of Microconomics., 2016). Equity, ion the other hand, means the benefits of the resources are distributed fairly among the members of the society. In many cases, societies face a tradeoff between more consumer goods, which include low taxes and more public goods, which involve defense and social programs.
Since the government can borrow, there is a tradeoff between consumption for the current and future generations. In some cases, there is a tradeoff between the environments and jobs. As a society, there is a need to make various types of choices where there will always be a tradeoff between efficiency and equity (Mankiw, The Past and Future of Econ 101: The John R. Commons Award Lecture, 2020). A society that opts for equity over efficiency, means that it supports equal distribution of wealth, which is seen to be much humane, but will affect the society that is likely to suffer from a higher degree of inefficiency. On the other hand, the society that trades of efficiency over equity can be seen as Darwinian in the cruelest sense, where it is seen to ignore those who are suffering and unable to keep up (Mankiw, Principles of Microconomics., 2016). Efficiency can be defined as the property of society getting maximum benefits from its scarce resources. On the other hand, equity involves the property of distributing economic prosperity fairly amongst members of society.
A country can choose to have regulations that protect the environment from industrial waste. However, this comes at a cost, where the cost of enacting, enforcing, and ensuring that people abide by the laws cam be significant. There is also a likelihood of facing tradeoffs when it comes to the issue of unemployment. Many nations opt to provide a social safety program that protects the people that are down on their lack with regard to getting a job. However, this has associated costs, since it causes a certain degree of moral hazard, where it can discourage the members of the society from seeking work. It also leads to the use of resources that have been used for more productive purposes. Another example is on guns and butter. When a government spends more on national defense intending to protect borders, it is likely to spend less on consumer goods, hence affecting the livelihoods of its people.
From the examples, it does not mean that industries need to dump toxic materials on to the environment recklessly. It neither means that unemployed people should be left to starve. There is, however, a need to understand that tradeoffs are real. Policymakers, therefore, have the responsibility of choosing the most appropriate balance between efficiency and equity.
Mankiw, N. G. (2016). Principles of Microconomics.
Mankiw, N. G. (2020). The Past and Future of Econ 101: The John R. Commons Award Lecture. The American Economist, 0569434520910526.
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