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

Kaveri Foods Ltd. in Pune is deciding how much of its budget to allot to each of its products, how to forecast next year's demand, and whether to accept a bulk order at a lower price. Which of the following correctly identifies a microeconomic area of Business Economics covered by these decisions?

Demand analysis and forecasting is the microeconomic area. It deals with estimating demand for the firm's own products, which guides production and pricing. Balance of payments, national income and business cycles are macroeconomic subjects that describe the whole economy rather than a single firm's decisions.

  1. ADemand analysis and forecastingCorrect
  2. BBalance of payments analysis
  3. CDetermination of national income
  4. DAnalysis of the business cycle in the economy

Explanation

Demand analysis and forecasting is a core microeconomic area in the scope of Business Economics, together with production and cost analysis, pricing decisions and profit management. Balance of payments, national income and business cycles are macroeconomic topics describing the economy as a whole. They do not concern the firm's own demand forecast.

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