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Difficulty: MediumScale of Preference

A tailor receives a monthly allowance of N40,000\text{N}40,000 and arranges her pressing business needs in order of priority as follows:

1. Sewing machine maintenance: N20,000\text{N}20,000
2. Purchase of dress fabrics: N20,000\text{N}20,000
3. Workshop electricity bill payment: N15,000\text{N}15,000
4. Purchase of a new smartphone: N15,000\text{N}15,000

If she allocates her entire allowance strictly according to her scale of preference, what is the opportunity cost of her choice?

  1. The workshop electricity bill payment and the smartphone foregoneAnswer
  2. B
    The total financial outlay of N40,000\text{N}40,000 spent on maintenance and fabrics
  3. C
    The sewing machine maintenance and purchase of dress fabrics
  4. D
    The combined monetary expenditure of N30,000\text{N}30,000 required for the remaining items

Answer

The workshop electricity bill payment and the smartphone foregone
By following her scale of preference, the tailor allocates her N40,000 to the top two priority items: sewing machine maintenance (N20,000) and dress fabrics (N20,000). The opportunity cost of this choice is the real sacrifice made—specifically, the workshop electricity bill payment and the smartphone foregone.

Step-by-Step Solution

1
Calculate total expenditure by summing costs of items in order of priority until income is exhausted.
Items 1 and 2 cost N20,000+N20,000=N40,000\text{N}20,000 + \text{N}20,000 = \text{N}40,000, which fully exhausts the available N40,000\text{N}40,000 allowance.
A scale of preference requires satisfying wants starting from the highest priority item downwards until income is exhausted.
2
Identify the unfulfilled wants that could not be purchased due to scarcity of funds.
Item 3 (Workshop electricity bill payment) and Item 4 (Purchase of a new smartphone) are left unsatisfied.
Scarcity limits consumption choices, leaving lower-ranked items on the scale of preference unfulfilled.
3
Determine the opportunity cost of the decision.
The real cost is the workshop electricity bill payment and smartphone foregone.
Opportunity cost is defined as the alternative wants sacrificed when a choice is made.

Key Concept

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

Scale of Preference

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