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Questions and Answers

What is the main focus of Micro-Economics?

  • To study the overall economic phenomena or the economy as a whole
  • To study the individual economic units such as product pricing and consumer behavior (correct)
  • To analyze the behavior of firms and households
  • To study the external value of currency and balance of trade

    • What does Macro Economics analyze?

  • The individual economic units such as product pricing
  • The behavior of individual firms and households
  • The overall economic environment (correct)
  • The external value of currency only

    • What is an important area of study in Macro Economics?

  • Behavior of firms
  • Product pricing
  • Location of industry
  • National Income and National Output (correct)

    • Why is it important for business firms to understand the macroeconomic environment?

    <p>To understand the background of economic conditions that influence their performance</p> Signup and view all the answers

    What is NOT an area of study in Micro-Economics?

    <p>National Income and National Output</p> Signup and view all the answers

    What is the main difference between Micro-Economics and Macro Economics?

    <p>Micro-Economics focuses on individual economic units, while Macro Economics focuses on the economy as a whole</p> Signup and view all the answers

    What is an area of study in Business Economics?

    <p>Micro Economics</p> Signup and view all the answers

    Why is macroeconomic analysis important for business firms?

    <p>To understand the overall economic environment in which they operate</p> Signup and view all the answers

    What type of economics is used to solve operational issues?

    <p>Micro Economics</p> Signup and view all the answers

    What is the purpose of demand forecasting in business economics?

    <p>To predict future demand for goods and services</p> Signup and view all the answers

    What is the relationship explained by production theory?

    <p>Between inputs and outputs</p> Signup and view all the answers

    What is the objective of a business economist in deciding on the optimum size of output?

    <p>To achieve the objectives of the firm</p> Signup and view all the answers

    What is the purpose of demand analysis in business economics?

    <p>To study the nature of consumer preferences</p> Signup and view all the answers

    What is the outcome of accurate demand forecasting in business economics?

    <p>Enable the firm to produce the required quantities at the right time</p> Signup and view all the answers

    What are operational issues related to in an organization?

    <p>Internal factors within the control of management</p> Signup and view all the answers

    What is the role of business economics in helping a manager?

    <p>To provide scientific tools for demand forecasting and production planning</p> Signup and view all the answers

    What is the primary reason why decision making involves evaluating feasible alternatives?

    <p>Because of the limited availability of productive resources</p> Signup and view all the answers

    What type of decision would involve determining whether a firm should launch a new product?

    <p>Strategic decision</p> Signup and view all the answers

    What is the primary goal of decision making in the context of businesses?

    <p>To choose the most efficient alternative</p> Signup and view all the answers

    Which of the following is an example of an operational decision?

    <p>Deciding on the optimum output and price</p> Signup and view all the answers

    Why is decision making in the context of businesses complex and dynamic?

    <p>Because of the complexity of the economic environment</p> Signup and view all the answers

    What is the primary reason why a firm would need to make decisions about procurement?

    <p>To gain a competitive edge in the market</p> Signup and view all the answers

    What type of decision would involve evaluating the performance of the management team?

    <p>None of the above</p> Signup and view all the answers

    What is the primary goal of managing risk and uncertainty in business decision making?

    <p>To ensure the survival of the business</p> Signup and view all the answers

    What is the primary focus of normative economic theory?

    <p>Suggesting 'what should be' a particular course of action</p> Signup and view all the answers

    What is the role of positive economic theory in Business Economics?

    <p>To understand the environment of the firm</p> Signup and view all the answers

    What is the primary objective of Business Economics?

    <p>To apply economic principles to policy formulation and decision-making</p> Signup and view all the answers

    What is the scope of Business Economics?

    <p>Covering most practical problems a manager or a firm faces</p> Signup and view all the answers

    Which of the following is a characteristic of normative economic theory?

    <p>It involves value judgments</p> Signup and view all the answers

    What is the relationship between positive and normative economic theory in Business Economics?

    <p>Normative theory is more important than positive theory</p> Signup and view all the answers

    What is the primary difference between positive and normative economic theory?

    <p>Positive theory is descriptive, while normative theory is prescriptive</p> Signup and view all the answers

    What is the role of Business Economics in decision-making?

    <p>To apply economic principles to policy formulation and decision-making</p> Signup and view all the answers

    What is the fundamental reason for the existence of an economy?

    <p>Unlimited human wants and scarce resources</p> Signup and view all the answers

    What is the primary focus of microeconomics?

    <p>How individual units allocate their scarce resources</p> Signup and view all the answers

    Which of the following is a characteristic of macroeconomics?

    <p>Study of large economic aggregates</p> Signup and view all the answers

    What is the primary objective of economics?

    <p>To allocate resources efficiently</p> Signup and view all the answers

    Which of the following is a characteristic of business economics?

    <p>Concentration on both economic and non-economic aspects</p> Signup and view all the answers

    What is the subject matter of economics divided into?

    <p>Micro and macro economics</p> Signup and view all the answers

    What is the primary concern of macroeconomics?

    <p>The overall levels of output and employment</p> Signup and view all the answers

    What is the assumption underlying economics?

    <p>Unlimited human wants and scarce resources</p> Signup and view all the answers

    Study Notes

    Micro-Economics vs Macro-Economics

    • Micro-Economics studies individual units such as consumers and firms, focusing on product pricing, consumer behavior, factor pricing, and behavior of firms.
    • Macro-Economics analyzes the overall economy, studying large economic aggregates such as national income, general price levels, balance of trade, and employment rates.

    Scope of Business Economics

    • Business Economics is concerned with the application of economic principles to decision-making and policy formulation.
    • It combines normative and positive economic theories, with a focus on the former.
    • The scope of Business Economics is wide, covering internal and external issues that a manager or firm faces.

    Internal Issues (Operational Issues)

    • Internal issues are operational issues that arise within the organization and are under the control of management.
    • Examples of operational issues include choice of business and size, product decisions, technology and factor combinations, pricing, and financing.
    • Microeconomic theories such as demand analysis and forecasting, production and cost analysis, and pricing and sales promotion are used to address these issues.

    Demand Analysis and Forecasting

    • Demand analysis studies the behavior of consumers in the market, including the effect of changes in determinants of demand.
    • Demand forecasting is the technique of predicting future demand based on past behavior of factors that affect demand.
    • Accurate forecasting is essential for a firm to produce the required quantities at the right time and arrange for factors of production.

    Production and Cost Analysis

    • Production theory explains the relationship between inputs and output.
    • A business economist must decide on the optimum size of output, given the objectives of the firm, and ensure that the firm is not incurring undue costs.

    Key Concepts

    • Human wants are unlimited, and resources are scarce.
    • Economics is the study of how scarce resources are allocated to satisfy competing unlimited wants.
    • The subject matter of Economics is divided into two parts: Micro and Macro Economics.
    • Microeconomics examines how individual units make decisions to efficiently allocate their scarce resources.
    • Macroeconomics studies the behavior of large economic aggregates, such as overall levels of output and employment, and how these aggregates shift over time.

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