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CA Foundation · Business Economics · Nature and Scope of Business Economics

A Business Economist at a Bengaluru software firm is asked to advise on (i) forecasting next year's demand for the firm's services, (ii) deciding whether to take a new project with uncertain returns, and (iii) choosing how much to invest in a new office. Under which broad areas of the scope of Business Economics do these three problems respectively fall?

The three problems match demand analysis and forecasting, risk and uncertainty analysis, and capital budgeting respectively. Predicting future demand, handling uncertain project returns, and deciding long-term investment in an office each belong to those distinct areas of Business Economics.

  1. ADemand analysis; risk and uncertainty analysis; capital budgetingCorrect
  2. BCost analysis; profit analysis; pricing policy
  3. CProduction analysis; demand analysis; inventory management
  4. DPricing policy; capital budgeting; cost analysis

Explanation

Forecasting demand is demand analysis and forecasting. A project with uncertain returns involves risk and uncertainty analysis. Deciding how much to invest in a new office is a capital budgeting problem. The other options mismatch at least one of the three problems with its area.

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