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

Which of the following statements best describes the nature of Business Economics as a discipline?

Business Economics is both positive and normative. It explains how business and market phenomena actually work, and it also prescribes what decisions managers should take to reach goals such as profit or growth, so it cannot be limited to either approach alone.

  1. AIt is purely a positive science with no role for value judgements
  2. BIt is a normative science only and ignores actual economic behaviour
  3. CIt is both positive and normative, as it explains business phenomena and also suggests courses of actionCorrect
  4. DIt deals only with macroeconomic aggregates such as national income

Explanation

Business Economics analyses how firms actually behave (positive) and also advises managers on what they should do to achieve objectives (normative). Option A and B each capture only one side. Option D is wrong because the subject is mostly micro-economic in its approach, though it uses macro conditions as the business environment.

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