CA Foundation · Business Economics · Nature and Scope of Business Economics
Which of the following is a topic that falls under the macroeconomic applications within the scope of Business Economics, rather than the microeconomic applications?
Estimating the effect of a repo rate change on the overall business climate is a macroeconomic application. Macro issues relate to the external environment such as interest rates, inflation and national income, whereas pricing, input mix and brand demand forecasting are firm-level microeconomic problems.
- ADetermining the price of a firm's product under monopolistic competition
- BEstimating the effect of a change in the repo rate on the overall business climate and demandCorrect
- CDeciding the optimal combination of labour and capital for a factory
- DForecasting the demand for a single brand of toothpaste
Explanation
Microeconomic applications deal with problems of the individual firm such as demand analysis, production, cost and pricing. Macroeconomic applications deal with the external business environment, such as interest rates, inflation, national income and government policy. The effect of a repo rate change on the overall business climate is therefore macroeconomic. The other options concern a single firm or product.
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