Introduction to Business EconomicsMTP May 23Question 630 of 209
All Questions

Which of the following statements is not correct?

Options

AScarcity of resources is the key problem of all economies
BEconomic inequalities lead to wide differences in economic opportunities to people
CEconomic instability is very common under capitalism
DFreedom of enterprise is one of the main characteristics of command economy
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Correct Answer

✅ Option d — Freedom of enterprise is one of the main characteristics of command economy

All Options:

  • AScarcity of resources is the key problem of all economies
  • BEconomic inequalities lead to wide differences in economic opportunities to people
  • CEconomic instability is very common under capitalism
  • DFreedom of enterprise is one of the main characteristics of command economy

Detailed Solution & Explanation

• The question asks us to identify the incorrect statement among the given options. We need to evaluate each statement based on fundamental economic principles. • Let's analyze option (D): "Freedom of enterprise is one of the main characteristics of command economy." A command economy (also known as a centrally planned economy) is characterized by government control over all major economic decisions, including production, distribution, and pricing. In such an economy, there is very limited or no freedom for individuals or private businesses to own resources or make independent economic choices. Freedom of enterprise, which means individuals can start and operate businesses with minimal government interference, is a hallmark of a market economy or capitalism, not a command economy. Therefore, this statement is incorrect. • Option (A) states: "Scarcity of resources is the key problem of all economies." This is a fundamental principle of economics. Resources (land, labor, capital, entrepreneurship) are limited, while human wants are unlimited. This scarcity forces all economies, regardless of their type, to make choices about what to produce, how to produce, and for whom to produce. This statement is correct. • Option (C) states: "Economic instability is very common under capitalism." Capitalism, characterized by free markets and private ownership, is known for its business cycles, which include periods of boom, recession, depression, and recovery. These fluctuations lead to economic instability, such as inflation, unemployment, and recessions. This statement is generally considered correct. • Since option (D) directly contradicts the definition and characteristics of a command economy, it is the incorrect statement.

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 Syllabus

Exam 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.

Related Comparison Tables

Microeconomics vs Macroeconomics: The Complete CA Foundation GuidePositive vs Normative Economics: Fact vs Opinion

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