a.
i. Distinguish between:
money cost and opportunity cost
ii. Distinguish between:
normal good and inferior goods
b.
i. Explain how the scale of preference assists the following economic groups in making efficient allocation of their resources:
individuals
ii. Explain how the scale of preference assists the following economic groups in making efficient allocation of their resources:
firms
iii. Explain how the scale of preference assists the following economic groups in making efficient allocation of their resources:
government
ai. Money cost is the actual amount of money spent on a good or service while opportunity cost is the value of the next best alternative forgone in order to obtain that good or service.
For example, Ade has #50 and he is to buy a pair of trouser and a T-shirt. If he decides to buy the trouser, his opportunity cost is the T-shirt he did not buy while the money cost is the #50 he used in buying the trouser.
aii. A normal good is a good for which demand increases as income increases while an inferior good is a good for which demand decreases as income increases.
bi. The scale of preference assists individuals by allowing them to rank their wants in order of importance and allocate their resources accordingly. This ensure that they spend their limited resources on the most important wants first.
bii. The scale of preference helps firms in determining which goods and services to produce first, based on consumer demand. This ensures that they produce goods that are most in demand, maximizing profit.
biii. The scale of preference assists governments in allocating resources to the most important needs first, such as infrastructure, healthcare, and education, in order to maximize the welfare of society.
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