Theory question 103
Basic Concepts(a) Explain why a scale of preference is important to an individual.
(b) Discuss how the knowledge of the basic concepts of Economics can help a producer.
(c) State any four factors that can help a producer to increase the supply of a commodity.
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(a) An individual's income is limited while wants are many; listing wants in order of importance lets him satisfy the most pressing first, make rational choices, get maximum satisfaction from his income, and know the opportunity cost of each choice.
(b) Scarcity tells the producer resources are limited; choice and scale of preference help him decide what to produce based on expected profit; opportunity cost shows what he gives up in each choice, so he allocates resources to the most profitable uses efficiently.
(c) Any four: rise in the price of the commodity; lower cost of inputs; better technology; government subsidies or lower taxes; good weather; more capital/credit; better storage and transport.
Scarcity, choice, scale of preference and opportunity cost are the basic concepts.