scales of preference and its importance. the understanding of the scale of preference to economics and reasons. how government makes plans using the scale of preference. , planning is one of the major benefits of any organization. so to make plans for the proper use of the scarce resources, the use of a scale of preference its importance comes to play
WHAT IS THE SCALE OF PREFERENCE
The scale of preferences is defined as a list of unsatisfied wants arranged in the order of their relative importance. In other words, it is a list showing the order in which we want to satisfy your wants arranged in order of priority. Scales of Preference is an economic terminology which means ranking pr arranging our needs or wants on the basis of their importance.
This can be an imaginary or tabulated method. Needs and wants are insatiable. By insatiable, we mean the needs are limitless, and the resources to satisfy them are limited which invariably explains the basic concept of economics
importance of scale of preference
Therefore, ranking our needs and wants based on what we need most is important for the effective management of resources. After itemizing your needs in a tabulated form, then you go ahead and choose what’s most important to you, the tabulated format of arranging our needs is called the scale of preference
The need for a scale of preference arises because human needs are vast and the resources to satisfy those needs are limited.
The concept of the scale of preference is important in economics and personal finance because it helps individuals and businesses make decisions about how to allocate their limited resources, such as time and money, among different competing alternatives or choices.
The scale of preference is a ranking of choices in order of their importance or preference. It helps individuals and businesses to determine the most important needs or wants that they need to satisfy with their available resources. For example, a household may have a limited income and needs to decide how to allocate it among various needs such as food, shelter, clothing, and entertainment.
By ranking these needs in order of importance, the household can decide how much money to allocate to each need, based on their priorities.
Similarly, businesses use the concept of the scale of preference to make decisions about how to allocate their resources among different investment opportunities or projects. By ranking these projects in order of importance, the business can determine which projects to invest in first and how many resources to allocate to each project, based on their expected returns and risks.
In summary, the scale of preference is important because it helps individuals and businesses to prioritize their needs or investment opportunities, and allocate their limited resources in the most efficient and effective way.
In the scale of preferences, the most pressing wants come first and the least pressing ones come last. It is after the first on the list has been satisfied that there will be room for the satisfaction of the next.
the power and the will of Choice, therefore, arise because human wants are unlimited or numerous, while the resources for satisfying them are limited or scarce.
RANKING OUR NEEDS AND WANTS
When it comes to ranking needs and wants, it’s important to prioritize our basic necessities before considering our desires and preferences. While individual priorities may vary, here’s a general ranking that can help guide you:
- Physiological Needs: These are the most fundamental requirements for survival, including:
- Food: Access to nutritious and sufficient food.
- Water: Availability of clean and safe drinking water.
- Shelter: A secure and comfortable place to live.
- Clothing: Appropriate clothing to protect from the elements.
- Healthcare: Access to medical care and essential medications.
- Safety and Security: Once your physiological needs are met, focus on ensuring your safety and security:
- Personal Safety: Protection from physical harm or danger.
- Financial Security: Stable income, savings, and insurance.
- Health and Well-being: Maintaining physical and mental wellness.
- Stable Environment: Living in a safe and peaceful community.
- Relationships and Belonging: Human beings are social creatures, and the need for connection is crucial:
- Love and Affection: Maintaining close and meaningful relationships.
- Friendship: Cultivating positive social interactions.
- Family: Nurturing and supporting family bonds.
- Community: Engaging with a supportive and inclusive community.
- Esteem and Self-Worth: Once the basic needs and social connections are met, focus on personal growth and self-esteem:
- Self-Respect: Valuing oneself and maintaining a positive self-image.
- Recognition: Feeling appreciated and acknowledged for achievements.
- Achievement: Pursuing personal goals and accomplishments.
- Status: Gaining respect and recognition in society.
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A TYPICAL EXAMPLE OF THE APPLICATION OF SCALE OF PREFERENCE
For example, Mr Babatunde, a trader who has only N10,000.00 wants to buy a pair of shoes, a shirt, a cap, a fan, a stove and a pressing iron as shown in Table 1.1.
Table 1.1 Babatunde’s Scales of PreferenceItems needed
The table above represents Mr Babatunde’s scale of preference; he has carefully arranged all numerous wants in order of priority. Since Mr Babatunde has only 610,000.00, he can only purchase a pair of shoes, a shirt, a cap and a fan.
Because his resources (610,000.00) are limited, he has to afford them based on his resources.
Important Uses of Scale of Preference
Ranking of needs: The scale of preferences helps us to rank our needs or wants in order of their relative importance.
Financial prudence: Scale of preferences does assist in managing our finances properly
Identification of highest priority: Scales of preference assist individuals in identifying quickly the most important needs among others.
Rational choice: Scale of preference assists individuals, firms and governments to make rational choices in the list of wants.
Efficient utilization of limited resources: Scale of preference also helps individuals to make efficient utilization of available resources
Optimum allocation of resources: Scale of preference facilities optimum allocation of resources
Maximization of satisfaction: Scales of preference enable economics agents to maximize their satisfaction
1 thought on “scale of preference”
The importance of scale of preference is copied from essential economics textbook.