This question was popular among the candidates. Some of them lost marks because they provided a one sided explanation when distinguishing normal goods from inferior goods in the (a) part of the question. Some of the candidates were unable to give strong answers in the (b) part, most of them focused on explaining scale of preference as a concept without exploring how scarcity necessitates choice and how the tool assists the listed economic units in allocating their resources. The performance of candidates in this question was average.

Candidates were expected to answer thus to obtain maximum marks:

      (a)  (i) Money cost is the expenses in terms of money incurred to produce or to have commodity.
While opportunity cost or real cost is the alternative forgone or that which has to be sacrificed to have a commodity.

(ii) A normal good is a good for which its demand increases when income increases and demand decreases when income decreases. While an inferior good is a good for which its demand tends to fall when income rises and its demand rises when income falls.    

(b)  (i) When an individual is faced with the problem of limited resources, a scale of preference will enable such an individual to order/arrange his wants according to which one gives the highest amount of satisfaction/is urgently needed/is the most important. He will then allocate his resources to obtain the want that gives the highest amount of satisfaction.

(ii)  A firm is also faced with the problem of limited resources needed to produce everything it wants. It will therefore rank its production according to which product will give the highest amount of satisfaction which is measured in terms of profit. The firm will therefore allocate its resources according to which product gives the highest amount of profit.

(iii) Government is also faced with the problem of limited resources/revenue. It cannot therefore produce all the goods and services it wants. It will therefore rank the goods and services according to which one will give the citizenry the highest amount of well-being or welfare. It will therefore allocate the resources to produce such goods and services.