scale of preference and its importance. the understanding of 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 proper use of the scarce resources, the use of scale of preference it’s importance comes to play
SO WHAT IS SCALE OF PERFERENCE
Scale of preference 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.
In the scale of preference, 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.
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 scale 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 preference helps us to rank our needs or wants in order of their relative importance.
Financial prudence: Scale of preference 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
2 comments