Economics 9708/12 — May/June 2017

Background Concept

Scarcity means that there are not enough goods to satisfy everyone's wants, so some mechanism must decide who gets what. The four options represent different rationing bases:

• Consumer preference: Goods go to those who express the strongest desire, but this often depends on ability to pay or influence.
• Market price: Goods go to those willing and able to pay the highest price, which tends to favour the wealthy.
• Political decision: A government or authority decides allocation, which can be designed to achieve equity (e.g., equal rations per person).
• Seller preference: The seller chooses who to sell to, which may favour friends, regular customers, or those offering side payments.

Understanding the Question

The question asks which rationing basis is most likely to produce the most equal distribution. It is not asking which is most efficient or most common, but which one deliberately aims for equality. The key is to recognise that only political decision-making can explicitly target equal shares; the other three are driven by market forces or personal bias, which typically generate unequal outcomes.

Approach

Consider each option in turn, thinking about the natural outcome of that rationing method. For each, ask: does this method tend to give everyone the same amount, or does it favour some groups? The answer is the one that can be designed to give everyone an equal share.

Step-by-Step Reasoning

1. Consumer preference (A): If goods are allocated based on who wants them most, those with more money or stronger bargaining power can outcompete others. This does not guarantee equality.

2. Market price (B): The price mechanism rations goods to those who can afford them. Higher prices exclude lower-income consumers, so distribution is unequal.

3. Political decision (C): A government can decide to give each person an equal ration (e.g., one loaf of bread per person during a shortage). This is the only method that can deliberately aim for equal distribution.

4. Seller preference (D): Sellers may favour friends, family, or those who pay extra, leading to arbitrary and unequal distribution.

Therefore, political decision is the most likely to result in equal distribution.

Key Takeaways

• Scarcity forces society to choose a rationing mechanism.
• Market-based mechanisms (price, consumer preference) tend to produce unequal outcomes.
• Political decisions can be designed to achieve equity, though they may sacrifice efficiency.
• The question tests understanding of how different economic systems allocate resources.

Common Mistakes

• Choosing "market price" because it is the most common in a market economy, without considering the question's focus on equality.
• Confusing "equal distribution" with "efficient distribution" — the question is about equity, not efficiency.
• Overlooking that "political decision" can be deliberately egalitarian.

Things to Be Careful About

• Read the question carefully: it asks for the basis most likely to result in equal distribution, not the one that is most common or efficient.
• Remember that in a planned economy, the government can set rations to be equal per person, which is not possible under the other mechanisms.