The branch of economic theory that deals with the problem of allocation of resources is
Options
AMicro-Economic theory.
BMacro-economic theory.
CEconometrics.
Dnone of the above
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Introduction to Business EconomicsMODULEQuestion 607 of 209
All Questions Correct Answer
✅ Option a — Micro-Economic theory.
All Options:
- AMicro-Economic theory.
- BMacro-economic theory.
- CEconometrics.
- Dnone of the above
Detailed Solution & Explanation
• The core problem in economics is scarcity – unlimited wants versus limited resources. This necessitates making choices about how to allocate these scarce resources.
• Microeconomics is the branch of economics that studies the behavior of individual economic units, such as consumers, firms, and industries. It focuses on how these individual units make decisions regarding the allocation of resources to maximize their utility or profit.
• For example, a firm decides how to allocate its labor, capital, and raw materials to produce goods and services. A consumer decides how to allocate their income among various goods and services. These are all problems of resource allocation at an individual or firm level.
• Therefore, the branch of economic theory that specifically deals with the problem of allocation of resources at a disaggregated level is Micro-Economic theory.
• Macro-economic theory, on the other hand, deals with the economy as a whole. It focuses on aggregate variables like national income, employment, inflation, and economic growth. While resource allocation is implicitly part of macroeconomic policy (e.g., government spending decisions), the direct study of how individual units allocate resources falls under microeconomics.
• Econometrics is a field that uses statistical methods to analyze economic data and test economic theories. It's a tool used in both micro and macroeconomics, not a separate branch dealing with resource allocation itself.
About This Chapter: Introduction to Business Economics
Paper
Paper 4: Business Economics
Weightage
5%
Key Topics
Meaning, Scope, Price Mechanism
This chapter lays the groundwork for understanding Business Economics as a discipline. It covers the meaning, scope, and nature of economics — including key distinctions like Microeconomics vs Macroeconomics, Positive vs Normative economics, and the fundamental economic problem of scarcity. Students learn how businesses use economic principles for decision-making in a competitive marketplace.
View Official ICAI SyllabusExam Strategy Tip
Focus on definitions and distinctions between concepts. Questions often test whether you understand the difference between Micro and Macro, or Positive and Normative statements.
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