Enter your keyword

Tradeoffs are part and parcel of production in the PPF. One cannot imagine business without tradeoffs. It is active in every sphere, the primary reason being that it is not possible to have limitless resources. Each company is bound by their number of employees, land available, technological tools and creation of goods and services. This means that one cannot dismiss tradeoffs as a rare occurrence. Interestingly even in Fig 2.1 it is observed that colas are traded off for pizzas. A trade off therefore can be treated as a limitation imposed on what one can achieve and what lies beyond the possibility of achievement. Tradeoffs therefore can be understood as boundaries placed on the companies. If one seeks to produce more of one commodity the other commodity productions need to be reduced or controlled.

In reality this method of limiting production is trading off. Therefore for example when doctors wish to invest in studies or research on AIDS or cancer they need to cut down from the budgets of other medical research. Similarly when the Congress wants to implement a policy for health and education it conducts budget cuts on other important areas of concern like defence or even homeland security. Even when environment groups ask for fewer trees to be cut down to preserve wildlife they ask for a trade off. The simplest example would be a child who wishes to study less and rest more also reaches a trade off. Therefore tradeoffs are very common to real-life dealings or deliberations. Opportunity costs are the expenses which are consulted in tradeoffs.