Economics is all about behaviour,and we "The people" face trade offs due to simple behaviour that we exercise day to day. From the start till the end of the day we come accross various trade offs with questions like : what to buy , from where to buy, when to buy, either this or that ,e.t.c.
Suppose you wake up in the morning all in a hurry to go to the office, get ready and step into the kitchen to quickly have bread and butter as your breakfast and then you realize that there is no bread at home (assumption -there is nothing else at home to make breakfast) - There comes a trade off in your mind and you question yourself either to go and buy bread or to grab something from the market on your way to office.
Trade off shows different alternatives to a peraon, it may even make you choose to walk away from options rather than selecting any one. For example you go to pizza hut to buy a pizza and there you are loaded with so many options and get confused therefore at the end you decide not to have any option and walk away.
Now comes a question on how to resolve a trade off ?
The answer to the same is by doing cost benifit analysis - what is the cost to be paid and what will be the benifit received in return. This plays a critical role in our buying decision - More the benifit easier it becomes to select that particular option.
Let us go back to the first example - (option 1) either to buy a bread and make breakfast at home or (option 2) to have it from outside. In order to resolve this trade off we need to analyse the net benifit for both the options.
(Net benifit = Benifit - Cost)
Suppose, option 1 calculates to have a net benifit of $60 and option 2 calculates $80 as the net benifit. Therefore, we will shift to option 2 as there are additional 20 points.
When net benifit is more, the marginal benifit makes us to shift our choice.
Hence, we sacrifice option 1 to get marginal 20 points and go with option 2.
Thus this resolves the trade off.
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