Question

What types of economic trade-offs exist in our lives. Why do trade-offs exist? Use a real world example (not in the text) to support your answer.

What are common mistakes made with economic analysis? Use a real world example (not in the text) to support your answer.

Answer 1

Economic tradeoffs like higher unemployment and lower inflation and vice versa exists which causes government and central banks to stabilise the economy using mix of policies. Tradeoffs usually exists as macroeconomic variables show inverse correlation and is expressed as an opportunity cost.

Common mistakes made with economic analysis are over exaggerated data, extrapolation of analysis, biasedness and adulterated sample size for example analysis of CPI inflation by collecting data from different sources.

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