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Question

Difficulty: MediumScale of Preference

Match each consumer action regarding a scale of preference on the left with its underlying economic significance on the right.

  • Arranging unsatisfied wants in descending order of urgencyEstablishing a framework for rational financial decision-making under scarcity
  • Selecting the item placed at the top of the preference scaleMaximizing total utility from limited monetary income
  • Forgoing the second item on the preference scheduleIncurring the real opportunity cost of the choice made
  • Re-ordering items on the scale when market prices changeAdjusting consumer priority to reflect modified budget constraints

Answer

The correct pairings match: arranging wants by urgency with establishing a framework for rational decision-making; selecting the top item with maximizing utility from limited income; forgoing the second item with incurring real opportunity cost; and re-ordering items during price changes with adjusting priority to reflect budget constraints.
Constructing a scale of preference enables consumers to make rational economic choices. The item placed at the top yields highest satisfaction, while the second-ranked item left unpurchased constitutes the real opportunity cost of the selection. Shifts in market prices require adjusting priority ordering to remain within budget limits.

Step-by-Step Solution

1
Analyze the purpose of listing wants in descending order of importance.
Pairs with establishing a framework for rational decision-making under scarcity.
Scale of preference organizes subjective human wants so that limited means are applied systematically to pressing needs.
2
Determine the outcome of fulfilling the top item on the preference schedule.
Pairs with maximizing total utility from limited monetary income.
A rational consumer allocates income to the most urgent item first to attain maximum total satisfaction.
3
Identify the economic concept associated with the second item on the scale that remains unfulfilled.
Pairs with incurring the real opportunity cost of the choice made.
Opportunity cost is defined as the next best alternative sacrificed, which is the second item on a scale of preference.
4
Examine how relative price variations impact consumer preference rankings.
Pairs with adjusting consumer priority to reflect modified budget constraints.
When price changes affect affordability, rational consumers re-evaluate their list of wants to optimize expenditure within budget limitations.

Key Concept

Scale of Preference and Opportunity Cost
Estimated Time:1m 30s
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Topics

Scale of Preference

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