Question

Explain how a current event in national politics or economics reflects the concepts of trade-offs and opportunity costs. Do you agree with the choice that was made?

Answer 1

Let us take the example of demonitization that recently occured in India since it was an event of great magnanimity and a huge change in Indian economy . Demonitization suddenly rendered few currency notes of certain denominations as no more legal tender and launched new variety of notes or paper currency . The step was taken majorly to eradicate corruption and was a fight against hoarding of black money . People who do not pay taxes and hoard black money in cash will lose all their wealth overnight since that money is no more legal tender . Hence the notes with larger denominations were targetted . The opportunity cost of this incident was an economic downturn . Investors , small businessmen , farmers found it very difficult to cope with the situation . People has to wait in long lines infront of banks to exchange notes which was also a huge loss of labor hours . People stopped demanding goods and services since new notes availability was limited . So there was a trade offf between achieving a correuption free economy and a sound growing economy .

The choice that was made would be beneficial in the long run , since in the long run economy will adjust and people will succumb to the new conditions .