scale of preference and its importance

scales of preference and its importance. the understanding of scale of preference to economics and reasons. how government makes plans using the scale of preference. financial institution,planning is one of the major benefits of any organization. so to make plans for proper use of the scarce resources, the use of scale of preference it’s importance comes to play

SO WHAT IS SCALE OF PREFERENCE

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 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

Therefore, ranking our needs and wants based on what we need most is important for effective management of resources. After itemazing your needs in a tabulated form, then you go ahead and choose whats most important to you, the tabulated format of arranging our needs is called scale of preference The need for a scales of preference arises because human needs are vast and the resources to satisfy those needs are limited.

scale of preference. arithmetic mean

In the scale of preferences, the most pressing wants come first and the least pressing ones come last. It is after the first in the list has been satisfied that there will be room for the satisfaction of the next.

the power and the will of Choice therefore arises because human wants are unlimited or numerous, while the resources for satisfying them are limited or scarce.

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scale of preference

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 , shirt, cap, fan , stove and pressing iron as shown in table 1.1.
Table 1.1 Babatunde’s scales of preference
Items needed
Price(N)

Shoe
3,500.00

Shirt
1,000.00

Cap
500.00

Fan
5,000.00

Stove
3,500.00

Pressing iron
4,000.00

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, shirt, cap and fan.

Because his resources (610,000.00) is limited, he has afford based on his resources.


Importance of Scale of Preference


Ranking of needs: 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 assists individuals to identity quickly the most importance 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 enables economics agents to maximize their satisfaction

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