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

Which of the following issues falls within the scope of macroeconomic applications to Business Economics (as opposed to microeconomic applications)?

The repo rate question is a macroeconomic application. Business Economics uses macro analysis to study the external environment, such as interest rates, inflation and policy, which affects all firms. Pricing, marginal cost and input choice are firm-level decisions and therefore fall under microeconomic applications.

  1. ADetermining the price of a firm's own product under monopolistic competition
  2. BEstimating the cost of producing an additional batch of output
  3. CAssessing how a change in the RBI's repo rate may affect the firm's future sales and investment plansCorrect
  4. DDeciding the optimal input combination for a factory

Explanation

Macroeconomic applications deal with the external business environment such as interest rates, inflation, national income and government policy. A change in the repo rate is an economy-wide factor affecting demand and investment. The other options concern firm-level decisions on pricing, cost and input choice, which are microeconomic applications.

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