Efficiency and equity-:

The biggest trade off a society faces is between efficiency and equity, efficiency is the maximisation of output from available resources, and equity is the equal distribution of output, this trade off can be easily understood with the help of an illustration, consider a pie being made by the contributions of five different people, the size of the pie is efficiency, that is what is available, and equity is how the pie is divided, the main conflict arises when the pie isn’t made by the equal contribution of all the five people but it is argued that the pie should be divided equally among all the five people, just like the government spells out policies aiming for the welfare of the have nots by imposing taxes on the haves, this subsequently reduces the output because people think that the reward for hard work is reduced so people produce less which in turn reduces the size of the pie which automatically reduces the equitable distribution of pie. Government policies are generally aimed towards the welfare of society, and this is possible only when the income is redistributed from the rich to the poor, this might create dissent within the society but according to normative economic theorists this will create an environment of equality in part with the theory of distributive justice which essentially means the fair and just allocation of available resources.


Opportunity cost simply means what must be given up to obtain some item, while facing a trade off the best way to make a decision is to calculate the opportunity costs that accompany every possible action. Consider a child for an example, he has a certain amount of cash in his hand through which he can either buy a chocolate or a toy, in this trade off the opportunity cost of buying a chocolate is the toy. Opportunity cost can be used while dealing with classic trade-offs as mentioned earlier; for example, while dealing with guns versus butter the opportunity cost of choosing national security over consumer products is the decreased standard of living of the people, this opportunity cost has to be statistically calculated using the formula: opportunity cost = FO(return on foregone option)-CO(return on chosen option), considering an example, if there are 100 million rupees available with the government that can either be spent on defence sector or on consumer products, in this trade off opportunity cost is not the only decision making factor, but the impending situation such as external aggression or the economic health of the country would help make the path more clearer. So,

if the available 100 million rupees is spent on defence sector because of increased external aggression the standard of living of people affected thereafter is the opportunity cost of choosing national security over consumer products.


Economics is a major part of our routine life, and trade-offs are an essential element in that. In this series of articles we have understood some of the most important elements of trade-offs like opportunity costs and production possibility frontier(PPF) which are helpful in decision making while facing a trade off, opportunity cost is an important element because it provides a statistical view of the problem faced and numbers make it easier to reach a concrete ground, PPFs are helpful because they make a graphical representation of the trade off faced and helps decision maker to understand the problem more thoroughly and decide the number of options available within the trade off.

This series also helped in understanding some classic trade-offs faced by a society as a whole, the guns versus butter debate has long been a major headache for policymakers in which the this series concludes that butter is always a viable option instead of guns other factors remaining constant. The trade-off between economic output and environmental protection is concluded with the help of a graph, In which P, Q, R, S, AND T are the only viable options and considering the current situation environmental protection would be more feasible. In the efficiency versus equity debate, by following the principles of normative economics and distributive justice it is concluded that equity is a more viable option.

Aishwarya Says:

I have always been against Glorifying Over Work and therefore, in the year 2021, I have decided to launch this campaign “Balancing Life”and talk about this wrong practice, that we have been following since last few years. I will be talking to and interviewing around 1 lakh people in the coming 2021 and publish their interview regarding their opinion on glamourising Over Work.

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