Trade-off between efficiency and equity

Reference no: EM13144473

All societies face a trade-off between efficiency (productivity) and equity (fairness). Whenever a society focuses on production, they gain efficiency, but that makes the distribution of income and resources less fair throughout the population, so they lose equity. This provides an incentive for people to work because productivity is rewarded, but the consequence is more poverty, as those who are less productive will not be allocated much income. Therefore, the opportunity cost of increased efficiency is less equity and vice versa.

For the following macroeconomic events, explicitly define the opportunity cost of each macroeconomic event in terms of the cost to society or groups of individuals within the society; i.e., define what society trades off in choosing this event. In your answer include a discussion of:
• How the incentive to produce for workers and/or firms may be affected by this event?
• How efficiency and equity for workers and/or firms are affected by this event?

Reference no: EM13144473

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