Question

The concept of trade-offs is important to the economics discipline and to this course. Can you explain why economic investment ( investment in plant, equipment and machinery) represents a trade off between present and future consumption?

Answer 1

The trade-off is basically a condition in the convex where one thing is sacrificed for the gain of another thing trade-off is a very general principle concept which involves the basic principle of the scarcity of the resources in the economy because if anyone wants to produce more of one good then it is necessary to sacrifice is another good this thing can also be represented with the help of production possibility curve and the indifference curve.
Economic investment always having the experience of a trade-off because from the point of view of investor there is always a project planning and the investment always on the basis of a proper selection of the proposals and it is based on the rate of return, therefore, the investor very serious in the selection of a proper project and for this, the investor has to sacrifice another option because the investment is limited.
The tradeoff between present and future consumption is based on the selection of the business which we initially taking into the consideration and it will also affect the future planning of the investment, therefore, the good investment for all the future is always based on the good selection of the project in the present.