the other. The choice on a production possibilities set that is socially preferred, or the choice on an individual’s

budget constraint that is personally preferred, will display allocative efficiency.

The basic budget constraint/production possibilities frontier diagram will recur throughout this book. Some

examples include using these tradeoff diagrams to analyze trade, environmental protection and economic output,

equality of incomes and economic output, and the macroeconomic tradeoff between consumption and investment.

Do not allow the different labels to confuse you. The budget constraint/production possibilities frontier diagram is

always just a tool for thinking carefully about scarcity, tradeoffs, and efficiency in a particular situation.

Access for free at openstax.org
2.3 • Confronting Objections to the Economic Approach 41

FIGURE 2.6 The Tradeoff Diagram Both the individual opportunity set (or budget constraint) and the social
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