Q.Which one of the following statements about the nature of Business Economics is correct?

Business Economics rests on positive analysis (what is) but exists to prescribe the best course of action (what ought to be done), which makes it largely normative.

Why (c) is correct: Positive economics describes what is (e.g. how demand responds to a price change), while normative economics prescribes what ought to be done (e.g. the price the firm should set to maximise profit). Business Economics uses positive analysis as its foundation, but its entire purpose is to recommend the best decision to management — that decision-guiding, prescriptive role makes it largely normative.

Why the distractors are wrong:

• (a) is wrong because it denies the normative side. If Business Economics were purely positive it could never advise a manager on what to do, which is its whole reason for existing.
• (b) is wrong because Business Economics is essentially microeconomic (the individual firm), not macroeconomic; it uses macro only to read the environment.
• (d) is wrong because Business Economics is both a science (systematic study of cause and effect) and an art (skilful application) — not a pure art with no scientific basis.

A frequent error is treating 'positive' and 'normative' as opposites where only one can apply. Business Economics is both — it analyses positively and then prescribes normatively; the normative, decision-guiding purpose is what dominates.