ACCA Financial Management (F9) Certification Practice Exam

Which economic branch deals with individual and business decisions?

1. Macroeconomics

2. Microeconomics

3. Global economics

4. Behavioral economics

The correct answer is: Microeconomics

Microeconomics is the branch of economics that focuses on the behavior of individual consumers and businesses, examining how they make decisions regarding the allocation of resources. It analyzes various factors that influence consumer choices, such as prices, income levels, and preferences, as well as how firms determine their production processes, pricing strategies, and market competition. By concentrating on these smaller units, microeconomics helps explain how supply and demand interact within specific markets and how various factors can lead to changes in market equilibrium. This focused approach provides valuable insights into the workings of the economy at a granular level, guiding businesses in their decision-making processes while also informing policymakers about the potential impacts of economic policies on individuals and businesses alike. In contrast, macroeconomics looks at the economy as a whole, including national and global economic aggregates, while global economics considers international trade and finance issues. Behavioral economics, on the other hand, explores how psychological factors affect economic decision-making. Each of these branches serves a distinct purpose, but microeconomics specifically addresses the decisions made by individuals and firms directly.