38 Questions
What is the primary distinction between Positive Economics and Normative Economics?
Positive Economics describes economic facts, while Normative Economics evaluates them.
What is outside the scope of Business Economics?
Accounting Standards
Which of the following statements is incorrect about Business Economics?
Business Economics is a normative science.
Why are economic goods considered scarce resources?
Because they do not exist in adequate quantity to satisfy the requirements of the society.
In a free market economy, the allocation of resources is determined by
Consumer preferences.
What is the primary means of allocating resources in a capitalist economy?
Prices
What is the primary focus of Business Economics?
Microeconomic variables
What is the other name for Business Economics?
Managerial Economics
What is a major focus of economics, in addition to resource allocation?
Understanding fluctuations in resource utilization
What is a consequence of insufficient demand during periods of economic downturn?
Idle factories, workers, and productive resources
What is a benefit of studying economics?
It enables us to develop an analytical approach to understanding economic issues
What is a characteristic of most economic problems?
They are complex and influenced by multiple factors
What do economic tools assist with?
Choosing the best course of action among alternative options
What is an example of an economic issue?
A change in the price of a single commodity
What is not a primary concern of economics?
The aesthetics of product design
What is a challenge in understanding economic issues?
Economic issues are complex and influenced by multiple factors
What are the two fundamental reasons that lead to the existence of economy?
Limited resources and unlimited wants
What is the primary focus of Microeconomics?
Behaviour of individual units
What is the primary focus of Macroeconomics?
Behaviour of large economic aggregates
What is the main objective of economics?
To allocate resources efficiently
What is the primary characteristic of economic assumptions?
Based on certain assumptions
What is the main difference between Microeconomics and Macroeconomics?
Microeconomics studies individual units, while Macroeconomics studies aggregates
What is the main concern of Business Economics?
Both economic and non-economic aspects
What is the main approach of Business Economics?
Both micro and macro approach
What is the primary goal of industries in the public sector?
To provide welfare to the community
What is a characteristic of a mixed economy?
Economic freedom and existence of private property
What is a benefit of the price mechanism in a mixed economy?
Efficient decision-making and better resource allocation
What is a disadvantage of a mixed economy?
Substantial uncertainties
What is a benefit of government's legislative measures in a mixed economy?
Aversion of disadvantages of cut-throat competition
What is a characteristic of a combined sector?
Both the government and private enterprises have equal access
What is the primary factor that influences a society's decision on the technique of production to use?
Relative prices of labour and capital
What is the main reason a society cannot satisfy every want of all its people?
Limited resources and unlimited wants
Why does a society need to make provision for economic growth?
To ensure future production capacity increases
What is the consequence of using all scarce resources for current consumption?
Stagnant standards of living
What is the primary goal of deciding 'for whom to produce'?
To distribute goods and services equitably
Why does a society need to decide on the technique of production?
To make the best use of available resources
What is the purpose of making provision for future production?
To ensure future economic growth
What is the implication of not making provision for future production?
Stagnant standards of living
Study Notes
Positive and Normative Economics
- Positive Economics describes the facts of the economy.
- Normative Economics involves evaluating whether some of these facts are good or bad for the welfare of the people.
Business Economics
- Business Economics is also called Managerial Economics.
- It has a close connection with statistics.
- It is concerned with the allocation of resources and the processes by which the productive capacity of these resources is increased.
Economic Goods and Scarcity
- Economic goods are considered scarce resources because they do not exist in adequate quantity to satisfy the requirements of the society.
- Human wants are unlimited and the resources are scarce.
Economic Systems
- In a free market economy, the allocation of resources is determined by consumer preferences.
- A capitalist economy uses prices as the principal means of allocating resources.
- Mixed economy combines the advantages of capitalist and socialist economies.
Decision-Making in Economics
- A society has to decide what to produce, how to produce, for whom to produce, and what provision should be made for economic growth.
What to Produce?
- The choice of what to produce depends on the availability of different factors of production and their relative prices.
How to Produce?
- The choice of how to produce depends on the availability of different factors of production and their relative prices.
For Whom to Produce?
- A society has to decide on who should get how much of the total output of goods and services.
What Provision Should be Made for Economic Growth?
- A society has to decide how much saving and investment should be made for future progress.
Mixed Economy
- Mixed economy has merits such as economic freedom, price mechanism, consumers' sovereignty, and advantages of economic planning.
- It also has disadvantages such as substantial uncertainties.
- It combines the advantages of capitalist and socialist economies.
This quiz covers the basics of business economics, including the difference between positive and normative economics. Test your understanding of the nature and scope of business economics.
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