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

Which of the following statements about the scope of Business Economics is correct?

Business Economics covers both the microeconomic analysis of the firm and the macroeconomic environment, because a firm's decisions depend on economy-wide conditions like inflation, interest rates and policy. It also uses both positive and normative approaches, so the other statements are wrong.

  1. AIt is limited to the microeconomic analysis of the firm and excludes all macroeconomic factors
  2. BIt covers both microeconomic analysis of the firm and the macroeconomic environment, because the firm's decisions are influenced by economy-wide conditionsCorrect
  3. CIt is limited to the macroeconomic study of national income and has no concern with a firm's costs
  4. DIt deals only with positive statements and never involves normative judgements

Explanation

Business Economics is mainly micro in character, but it also takes the macro environment (inflation, interest rates, policy, business cycles) into account since it affects the firm. It is both positive and normative, and does deal with costs, so the other statements are incorrect.

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