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In economics a trade-off is expressed in terms of the opportunity cost of a particular choice, which is the loss of the most preferred alternative given up. [2] A tradeoff, then, involves a sacrifice that must be made to obtain a certain product, service, or experience, rather than others that could be made or obtained using the same required resources.
Considered one of the justice theories, equity theory was first developed in the 1960s by J. Stacey Adams, a workplace and behavioral psychologist, who asserted that employees seek to maintain equity between the inputs that they bring to a job and the outcomes that they receive from it against the perceived inputs and outcomes of others. [2]
The neoclassical model analyzes the trade-off between leisure hours and working hours. Railroad work. Households are suppliers of labour. In microeconomic theory, people are assumed to be rational and seeking to maximize their utility function. In the labour market model, their utility function expresses trade-offs in preference between leisure ...
The Williamson tradeoff model is a theoretical model in the economics of industrial organization which emphasizes the tradeoff associated with horizontal mergers between gains resulting from lower costs of production and the losses associated with higher prices due to greater degree of monopoly power.
The basic assumption of efficiency wage theory is that the efficiency of workers increases with the increase of wages. In this case, companies face a trade-off between hiring productive workers at higher salaries or less effective workers at lower wages.
The trade-off theory of capital structure is the idea that a company chooses how much debt finance and how much equity finance to use by balancing the costs and benefits. The classical version of the hypothesis goes back to Kraus and Litzenberger [ 1 ] who considered a balance between the dead-weight costs of bankruptcy and the tax saving ...
When drawing diagrams for businesses, allocative efficiency is satisfied if output is produced at the point where marginal cost is equal to average revenue. This is the case for the long-run equilibrium of perfect competition. Productive efficiency occurs when units of goods are being supplied at the lowest possible average total cost.
The idea of organizational justice stems from equity theory, [10] [11] which posits that judgments of equity and inequity are derived from comparisons between one's self and others based on inputs and outcomes. Inputs refer to what a person perceives to contribute (e.g., knowledge and effort) while outcomes are what an individual perceives to ...