Personal finance II - JSS3 Business studies Past Questions and Answers - page 2

Consumption in personal finance refers to the spending of money on goods and services to satisfy needs and wants. It is important because it involves making choices about how to allocate limited resources to maximize satisfaction or utility.

Understanding the scale of preference helps individuals prioritize their needs and wants based on importance, allowing them to allocate their resources more effectively and make informed decisions about spending and saving.

Preparing an individual budget involves estimating income from various sources, listing all expenses including fixed and variable costs, savings goals, and comparing income with expenses to ensure financial stability and meet financial goals.

Fixed costs are expenses that remain constant over time, such as rent or mortgage payments, while variable expenses fluctuate based on usage or consumption, like groceries or utilities.

A budget deficit occurs when expenses exceed income. Individuals can address it by reducing discretionary spending, finding ways to increase income, or reallocating resources to meet essential needs first.