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

Consider these statements about the nature of Business Economics: (I) It is pragmatic, concerned with solving practical business problems rather than purely theoretical issues. (II) It is concerned with the economy-wide problem of income distribution as its main focus. (III) It uses the assumptions of economic theory exactly as they are, without any modification for real business conditions. (IV) It is a branch of economics that is mainly micro in character. Which statements are correct?

Only statements I and IV are correct. Business Economics is pragmatic, aiming to solve practical business problems, and it is mainly microeconomic in character. It does not focus mainly on economy-wide income distribution, and it adapts theoretical assumptions to real business conditions rather than using them unchanged.

  1. A(I) and (IV) onlyCorrect
  2. B(I), (II) and (IV) only
  3. C(II) and (III) only
  4. D(I), (III) and (IV) only

Explanation

Business Economics is pragmatic (I) and mainly micro in character (IV). Its main focus is the firm, not economy-wide income distribution, so (II) is wrong. It also relaxes or modifies theoretical assumptions to fit real business situations, so (III) is wrong. Hence only (I) and (IV) are correct.

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