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Difficulty: HardScale of Preference

A student with a limited budget of N12,000\text{N}12,000 constructs a scale of preference listing four items in descending order of priority: Textbooks (N7,000\text{N}7,000), School Shoes (N5,000\text{N}5,000), Scientific Calculator (N4,000\text{N}4,000), and School Bag (N5,000\text{N}5,000). Match each aspect of the student's economic decision on the left with its corresponding concept or interpretation on the right.

  • Selecting Textbooks and School Shoes for purchaseSatisfaction of effective demand within the income constraint
  • Forgoing the Scientific CalculatorOpportunity cost (real cost) of the selected items
  • Ranking Textbooks higher than School ShoesEvaluation of relative marginal utility
  • Inability to purchase all items on the listDirect consequence of scarcity of economic resources

Answer

The correct pairings are: 'Selecting Textbooks and School Shoes for purchase' matches 'Satisfaction of effective demand within the income constraint'; 'Forgoing the Scientific Calculator' matches 'Opportunity cost (real cost) of the selected items'; 'Ranking Textbooks higher than School Shoes' matches 'Evaluation of relative marginal utility'; and 'Inability to purchase all items on the list' matches 'Direct consequence of scarcity of economic resources'.
A scale of preference is a list of unsatisfied wants arranged in order of relative importance. It enables a rational consumer to maximize utility under income constraints. Here, purchasing Textbooks and Shoes fulfills effective demand within the N12,000\text{N}12,000 limit. The highest-ranked unfulfilled want, the Scientific Calculator, is the opportunity cost. The ordering of items reflects relative marginal utility, and the overall shortfall of funds illustrates scarcity.

Step-by-Step Solution

1
Calculate total expenditure from available income
Income = N12,000\text{N}12,000. Purchasing Textbooks (N7,000\text{N}7,000) and School Shoes (N5,000\text{N}5,000) exhausts the budget total (N12,000\text{N}12,000).
Determines which wants become effective demand.
2
Identify the opportunity cost of the choice
The next highest priority item that remains unfulfilled is the Scientific Calculator (N4,000\text{N}4,000).
Opportunity cost is defined as the next best alternative forgone, not the total monetary outlay or all unfulfilled wants combined.
3
Analyze the priority order on the scale of preference
Textbooks are ranked above School Shoes because they yield higher relative marginal utility to the student.
A scale of preference ranks wants according to their urgency and utility to the individual.
4
Relate unfulfilled wants to underlying economic principles
The total cost of all desired items is N21,000\text{N}21,000, exceeding the N12,000\text{N}12,000 income.
Demonstrates economic scarcity, forcing the individual to make choices based on a preference schedule.

Key Concept

Scale of Preference, Scarcity, and Opportunity Cost
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Topics

Scale of Preference

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