GCE Economics 2013 Theory — Question 4

Model answer

(i) Individuals: the scale of preference assists individuals or consumers by allowing them to rank their wants in order of importance and allocate their limited (scarce) resources to the best alternative uses, enabling them to satisfy their most important wants first. (ii) Firms: the scale of preference helps firms determine which goods and services to produce first, based on consumer demand, ensuring they produce goods that are mostly demanded and maximise their profit. (iii) Governments: the scale of preference enables government to allocate resources to the most important needs or areas, such as healthcare, education and infrastructure, in order to maximise or promote the welfare of members of society.