Basic Concept of Economics – Scale of Preference

4. Scale of Preference: 

This refers to a list of an individual’s wants, in order of their relative importance. In other words, it refers to a list of wants of an individual, firm, or government, arranged in order of priority, starting from the most important to the least.

Scale of preference helps the various economic units to make rational choices and to maximize utilitythe state of being useful, profitable, or beneficial. More (usefulness) since it would enable them to choose their most pressing wants first.

For example, a student who is in need of a laptop, bag, biro, shoes, trousers, shirts, exercise books, etc., but with limited resources, may draw his scale of reference like this:

If the above student has ₦8000.00 at the time, based on his scale of preference he can afford only a laptop, bag, and textbooks as a result of his limited available resources of ₦8000.00 relative to his needs.   

Importance of Scale of Preference:

1. It enables us to make wise decisions.

2. It enables the efficient use of limited available resources.

3. It helps an individual to be a rational thinker in terms of choice-making.

4. It helps individuals, firms, or the government to rank their wants in order of importance.

5.  It enables us to accomplish objectives set for the development of the economy.

6. It enables us to have an efficient allocation of resources.

7. To put in place proper methods and techniques for growth.

Advantages of Scale of Preference:

1. Scale of preference enables us to think of the future. 

2. It enables the individual to think rationally about what to purchase.

3. Scale of preference enables firms to ensure efficient allocation of resources.

4. It reduces resources wastage or mismanagement.

5. It enables us to plan accordingly.