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Business Economics is described as being generally normative in nature primarily because it:
AStudies aggregates of the whole economy alone
BOnly describes economic behaviour without any prescription
CAvoids all welfare considerations in its analysis
DPrescribes what should be done in policy and decision-making
Answer & Solution
Correct answer: D. Prescribes what should be done in policy and decision-making
1. Normative science is prescriptive and carries value judgements.
2. Business Economics is normative because it suggests what should be done in policy formulation, decision-making, and planning.
3. So the prescriptive 'what should be done' option is the answer.
4. Trap A: studying only economy-wide aggregates describes macro focus, not why it is normative.
5. Trap B: describing behaviour without prescription is positive science, the opposite of normative.
6. Trap C: normative science actually embeds welfare considerations, so 'avoids all welfare' is false.
_Source: ICAI BoS CA Foundation Paper 4 Business Economics, Ch 1 Unit I "Nature and Scope of Business Economics", p.6_
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