Efficiency-Equity Tradeoff

The efficiency-equity tradeoff refers to the balance between two goals in economic and social policy. Efficiency aims to maximize overall output or wealth, ensuring resources are used in the most productive way. Equity, on the other hand, focuses on fairness and reducing disparities among people. Improving equity might mean redistributing resources, which can decrease overall efficiency because resources are not used in the most productive way. Conversely, focusing solely on efficiency could lead to greater inequality. Policymakers often have to balance these goals, weighing the benefits of economic growth against the importance of fairness and social justice.