Economics And Microeconomics: The Concepts Of Efficiency And Equity

Relevance

The concepts Efficiency and Equity are most important one of the concepts . Efficiency relates to how well an economy allocates scarce resources to meets the needs and wants of consumers.

Equity or economic equality is an idea of fairness in economics. It also refers to equal life chances regardless of identity, to provide all citizens with a basic and equal minimum of income, goods, and services or to raise funds and commitment for redistribution.

There is always a trade-off between equity and efficiency. A economy can never attain the two at the same time . There is always an opportunity cost . Opportunity cost can be defined as the cost of the next best alternative that is forgone by choosing the other alternative. Only one, either Equity or Efficiency can be achieved

Microeconomics deals with the study of small individual units that make up an economy. The scope of microeconomics includes – 1.The theory of product, 2.The theory of factor pricing and 3.The theory of Economic welfare.

In microeconomics there is always a trade-off between equity or equal distribution of resources and efficient use of resources. But what exactly is a trade-off? In economics, the term trade-off is often communicated as an opportunity cost, which is the most ideal possible alternative. A trade-off involves a cost that must be paid to get a definite product or experience. A person may give up the opportunity of buying good B, because he might want to buy good A instead. For a person going to a football game, their economic trade-off is the money spent at the football club, as compared to the alternative of watching the game at home and saving their money.

A trade-off comprises of a sacrifice that must be made to gain a desired product or experience. Understanding the trade-off for every decision helps us to ensure that the resources being used are used wisely. Let us illustrate this with the help of an