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IAI Actuarial Core Principles · Business Economics · Relationship between economics and business

Which of the following is a microeconomic variable from the point of view of an Indian general insurer, as opposed to a macroeconomic variable?

The price elasticity of demand for the insurer's motor policies is the microeconomic variable, because it describes buyer response in a specific market. The inflation rate, current account deficit, repo rate and unemployment rate are all economy-wide aggregates and therefore macroeconomic.

  1. AThe year-on-year CPI inflation rate for India
  2. BIndia's current account deficit as a percentage of GDP
  3. CThe price elasticity of demand for the insurer's motor policiesCorrect
  4. DThe RBI's policy repo rate
  5. The national unemployment rate

Explanation

Price elasticity of demand for a specific product describes how buyers in one market respond to price changes, which is microeconomic. CPI inflation, the current account deficit, the repo rate and national unemployment are all economy-wide aggregates or policy variables, hence macroeconomic.

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