Economics and Business Environment
Microeconomics fundamentals
Economics questions test how markets allocate resources. Understand supply and demand, equilibrium, elasticity, and the effect of price controls. Elasticity determines who bears a tax burden - the less elastic side bears more. Know the shapes of cost curves and the profit-maximizing rule: produce where marginal revenue equals marginal cost, and shut down in the short run if price falls below average variable cost.
Market structures and macroeconomics
Distinguish perfect competition, monopolistic competition, oligopoly, and monopoly by number of firms, product differentiation, and barriers to entry. In macroeconomics, know GDP components (consumption, investment, government spending, net exports), inflation measurement, unemployment types, and the business cycle. Understand monetary policy (central bank tools: open market operations, reserve requirements, discount rate) and fiscal policy (government spending and taxation), and how each shifts aggregate demand.
International and business environment
Know exchange-rate effects on trade, comparative advantage, and the impact of tariffs. Understand how interest rates, inflation, and currency movements affect business decisions.
Traps
Watch for: confusing a shift in demand with a movement along the curve (price changes cause movement); assuming raising prices always raises revenue (depends on elasticity); and mixing fiscal with monetary tools.
Rule of thumb
When a policy changes, trace it through: tool → aggregate demand or supply → price level and output → business impact. Follow the chain rather than guessing the endpoint.