CA Foundation · Business Economics · Nature and Scope of Business Economics
Business Economics is often described as a bridge between economic theory and business practice. Which of the following best illustrates this role?
A firm using price elasticity of demand to decide on a price cut best shows Business Economics as a bridge, because it takes a theoretical concept and applies it to a real managerial decision. The other options are accounting routines or government actions.
- AA firm recording its sales in the journal at the end of each day
- BA firm using the concept of price elasticity of demand to decide whether to cut the price of its productCorrect
- CA government fixing the rate of income tax for the coming year
- DA bank preparing a bank reconciliation statement for a customer
Explanation
Using elasticity, a theoretical tool, to take a pricing decision is applying theory to a business problem. Recording sales and reconciling bank statements are accounting tasks, and fixing tax rates is a government fiscal decision, not a firm's decision.
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