Related Disciplines: Law, Economics and Quantitative Methods
Core concepts
Related disciplines support the core domains. Business law covers contract (offer, acceptance, consideration, intention), agency, sale of goods, and company law basics (separate legal personality, directors’ duties). Economics covers demand and supply, elasticity, market structures, inflation, and monetary/fiscal policy. Quantitative methods cover summarising data (mean, median, mode, standard deviation), probability, regression and forecasting, and decision-making under uncertainty (expected value, decision trees).
Traps that appear in questions
- Confusing offer with invitation to treat - a price list or advertisement is generally an invitation to treat, not an offer.
- Forgetting that consideration must be sufficient but need not be adequate.
- In economics, confusing a movement along the demand curve (price change) with a shift (income, tastes, prices of related goods).
- In statistics, using the mean for skewed data - the median is more robust.
- In decision trees, forgetting to subtract the cost of the decision (e.g. market research) from expected value.
Worked rule of thumb
Expected value: EV = Σ (probability × outcome). Example: a project yields Ksh 200,000 with probability 0.6 and Ksh 50,000 with probability 0.4. EV = 120,000 + 20,000 = Ksh 140,000. If research costing Ksh 20,000 improves information, compare EV with research minus its cost against EV without research.
Law and economics link
Company law’s separate legal personality (Salomon principle) underpins limited liability, which in turn affects credit and finance decisions.