Economic Trade Off

4 Key excerpts on "Economic Trade Off"

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  Executive Economics

  Ten Tools for Business Decision Makers

  • Shlomo Maital(Author)
  • 2010(Publication Date)
  • Free Press

    (Publisher)

  Was more agility worth somewhat less stealth? The answer depended on “value”—not the designers’ own values but those of the air force and Department of Defense, in whose hands the final decision rested. Much guesswork was involved.

  Business dilemmas of this sort are common. They are very difficult ones, because when producers make products for consumers, it is the consumers ’ values that count. The producer must weigh tradeoffs (what do I have to give up to get it?) and ask, what is it worth to my buyers? While tradeoffs themselves are generally objective in their nature and rely on concrete economic and engineering data, values are subjective, depending on the whims, tastes, and preferences of customers.

  To make effective tradeoff decisions, the decision maker needs to know both the underlying technology —in the tactical fighter case, the relation between agility and stealth, and the gain in one that a drop in the other permits—and the appropriate psychology —the relative values of agility and stealth, on the part of the ultimate consumer (in this case, the Secretary of Defense and his advisors).

  The two-bladed nature of business decisions, with the technical, engineering blade scissoring against the subjective, psychological blade, is typical. It requires that decision-making executives be capable of blending hard-headed technical knowledge with sensitive understanding of how people feel and think. This, too, appears to be a tradeoff—skill in one type of knowledge can come at the expense of the other. Executives need to be aware of their own strengths, and cultivate the area of decision making in which they may be weak. And above all, they must never lose touch with their customers.”12

  False Choices

  Sometimes, tradeoffs can seem like all-or-nothing choices, when in fact compromise is possible and probably wise. A critical type of tradeoff decision dilemma emerged in the early planning stages of America’s space shuttle project, the program aimed at building a vehicle for launching satellites and conducting research in space. Engineers and other experts grappled with a tough tradeoff between two features: Nonrecurring costs incurred building the space vehicle, versus recurring costs incurred each time the vehicle was launched. A very expensive system could be built that could be reused again and again. High initial nonrecurring costs would lead to lower operating costs in future. In this way, money could be spent now that would save money later.

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  Economics

  • William Boyes, Michael Melvin(Authors)
  • 2015(Publication Date)
  • Cengage Learning EMEA

    (Publisher)

  You trade off time at studying for time spent at the football game. scarcity The shortage that exists when less of something is available than is wanted at a zero price. 1. What are opportunity costs? opportunity cost The highest-valued alternative that must be forgone when a choice is made. 1 Notice the phrase “all else being the same.” The idea is that we are examining just one thing at a time—cost falls. It would be very, very difficult to ask what our attitude toward something is when cost falls, quality declines, color changes, our income decreases, and on and on. Thus, a common assumption, so common it is often not mentioned or written, is to allow only one thing to change. NOW YOU TRY IT Suppose you decided to attend a school where the tuition and other expenses add up to $4,290 per year. Are these your total costs? trade-off The giving up of one good or activity in order to obtain some other good or activity. 20 Chapter 2 Scarcity and Opportunity Costs Copyright 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. Each decision is a marginal decision. By marginal, economists mean additional or incremental or next unit. For instance, each term you must decide whether or not to register for college. You could work full time and not attend college, attend college and not work, or work part time and attend college. The time you devote to college will decrease as you devote more time to work.

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  The Give and Take of Sustainability

  Archaeological and Anthropological Perspectives on Tradeoffs

  • Michelle Hegmon(Author)
  • 2017(Publication Date)
  • Cambridge University Press

    (Publisher)

  12 Some Analytical Tradeoffs of Talking about Tradeoffs On Perspectives Lost in Estimating the Costs and Benefits of Inequality alf hornborg The concept of “tradeoffs” raises a number of issues regarding the organization of socioecological systems in the past and present. Most of these issues have been acknowledged and insightfully discussed by the editor in her chapters (Chapter 1 and Chapter 7) in this volume. In this chapter, I will add some further reflections on the tradeoffs represented by the very act of adopting a discourse on tradeoffs, focusing on the risks of subscribing to some of its implicit assumptions drawn from economics and resilience theory. I will be particularly concerned with how the discourse on tradeoffs can be used to rationalize and even justify inequalities in social systems where the most marginalized categories of people have no voice. Definitions of Tradeoffs and the Implicit Assumptions of Cost-Benefit Analysis In her introductory Chapter 1, Hegmon quotes a dictionary definition of tradeoffs as “giving up one thing in return for another.” In Chapter 4, Roscoe also resorts to a dictionary definition, referring to “a balancing of factors all of which are not attainable at the same time.” Logan in Chapter 5 defines a tradeoff as “the idea that when some things are gained, other things are lost,” and Spielmann and Aggarwal in Chapter 11 refer to “what needs to be given up in order to gain something else.” Such phrasings suggest a single managerial agent consciously deciding which course to follow, based on calculation and optimal balancing of costs and 272 benefits. As all of the contributors to this volume are of course aware, such conditions are rarely – if ever – applicable to socioecological change, and we should keep in mind that adopting the discourse on tradeoffs risks introducing tacit assumptions about the role of rational decision making in such processes.

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  Structured Decision Making

  A Practical Guide to Environmental Management Choices

  • Robin Gregory, Lee Failing, Michael Harstone, Graham Long, Tim McDaniels, Dan Ohlson(Authors)
  • 2012(Publication Date)
  • Wiley-Blackwell

    (Publisher)

  9 Making Trade-Offs

  By this point you’ve set clear objectives and performance measures, identified a creative range of alternatives, estimated consequences, and provided an explicit and honest representation of uncertainty. You’ve eliminated unnecessary information and alternatives that are clear ‘losers’. In some cases, this will already have led to a preferred solution or broadly accepted management action. But suppose you still face complicated choices – multiple objectives, many alternatives, complicated trade-offs – and there is no obvious solution. What now?

  This chapter will introduce some ways of thinking about value trade-offs and present tools to help deal with them constructively. Trade-offs are an unavoidable reality in environmental management. That shouldn’t be surprising: we face them all the time in our personal lives without getting too overwhelmed. We purchase a softcover book, knowing it won’t wear as well as its more costly hardcover version. We buy a smaller car because we’re willing to have less leg room in exchange for better environmental performance. These are conscious choices we make and if we’ve reflected on them carefully, we feel good about them. The only ‘bad’ trade-offs are the ones we make unknowingly, or without fully appreciating their implications. The goals of SDM with respect to trade-offs are:

  1 To avoid unnecessary trade-offs, by iteratively developing high quality alternatives that find win-wins wherever possible.

  2 To expose unavoidable trade-offs and promote constructive deliberation about them;

  3 To make trade-offs explicitly and transparently, informed by a good understanding of consequences and their significance.

  4 To create a basis for communicating the rationale for a decision to a broader public.

  This chapter introduces what we mean by trade-offs and why they matter. It summarizes research on how people think about them and then outlines an approach for dealing constructively with trade-offs in a deliberative environment. We end, as in other chapters, with some tips for dealing with tricky but common situations involving tough trade-offs faced by groups working on environmental management decisions.

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