ECONOMICS
PART 1
CPA SECTION 2
CCP SECTION 2
CIFA SECTION 2
CS SECTION 2
STUDY NOTES
,GENERAL OBJECTIVES
This paper is intended to equip the candidate with knowledge, skills and attitudes that will enable
him/her to apply the fundamental principles of economics in decision making
4.0 LEARNING OUTCOMES
A candidate who passes this paper should be able to:
• Apply basic mathematical and graphical techniques to analyse economic relationships
and interpret the results
• Apply the knowledge of economics in decision making
• Analyse economic problems and suggest possible policy related recommendations
• Apply knowledge of economics in international trade and finance
• Apply economic principles in the development and implementation of policies in
agriculture and industry
• Demonstrate an understanding of emerging economic issues.
CONTENT
4.1 Microeconomics
4.1.1 Introduction to economics
- Definition of economics
- Micro and macro economics
- The methodology of economics and its basic concepts
- Economic descriptions and analysis
- Scarcity, choice, opportunity cost and production possibility frontiers and curves
- Economic systems: free economy, planned economy and mixed economy
- Specialisation and exchange
4.1.2 Demand, supply and determination of equilibrium
4.1.2.1 Demand analysis
- Definition
- Individual demand versus market demand
- Factors influencing demand
- Exceptional demand curves
- Types of demand
- Movement along and shifts of demand curves
- Elasticity of demand
- Types of elasticity: price, income and cross elasticity
- Measurement of elasticity; point and arc elasticity
2 www.mykasnebnotes.com contact:0713440925
, - Factors influencing elasticity of demand
- Application of elasticity of demand in management and economic policy decision making
4.1.2.2 Supply analysis
- Definition
- Individual versus market supply
- Factors influencing supply
- Movements along and shifts of supply curves
- Definition of elasticity of supply
- Price elasticity of supply
- Factors influencing elasticity of supply
- Application of elasticity of supply in management and economic policy decision making
4.1.2.3 Determination of equilibrium
- Interaction of supply and demand, equilibrium price and quantity
- Mathematical approach to equilibrium analysis
- Stable versus unstable equilibrium
- Effects of shifts in demand and supply on market equilibrium
- Price controls
- Reasons for price fluctuations in agriculture
4.1.3 The theory of consumer behaviour
- Approaches to the theory of the consumer- cardinal versus ordinal approach
- Utility analysis, marginal utility (MU), law of diminishing marginal utility (DMU)
- Limitations of cardinal approach
- Indifference curve analysis
- Budget line
- Consumer equilibrium; effects of changes in prices and incomes on consumer
equilibrium
- Derivation of a demand curve
- Applications of indifference curve analysis: substitution effect and income effect for a
normal good, inferior good and a giffen good; derivation of the Engels curve
- Consumer surplus
4.1.4 The theory of a firm
4.1.4.1 The theory of production
- Factors of production
- Mobility of factors of production
- Production function analysis
- Short run analysis
- Total product, average and marginal products
- Stages in production and the law of variable proportions/ the law of diminishing returns
- Long run analysis
3 www.mykasnebnotes.com contact:0713440925
, - Isoquant and isocost lines
- The concept of producer equilibrium and firm's expansion curve
- Law of returns to scale
- Demand and supply of factors of production
- Wage determination theories
- Trade unions: functions and challenges
- Producer surplus/economic rent
4.1.4.2 The theory of costs
- Short run costs analysis and size of the firm's total cost, fixed cost, average cost, variable
costs and marginal cost
- Long run costs analysis
- Optimal size of a firm
- Economies and diseconomies of scale
4.1.5 Market structures
- Definition of a market
- Necessary and sufficient conditions for profit maximisation
- Mathematical approach to profit maximisation
- Output, prices and efficiency of: perfect competition, monopoly, monopolistic
competition, oligopolistic competition
4.2 Macroeconomics
4.2.1 National income
- Definition of national income
- Circular flow of income
- Approaches to measuring national income
- Concepts of national income: gross domestic product (GDP), gross national product
(GNP) and net national product (NNP), net national income (NNI) at market price and
factor cost, disposable income
- Problems of measurement; uses of national income statistics and their limitations
- Analysis of consumption, saving and investment and their interaction in a simple
economic model
- Determination of equilibrium national income
- Inflationary and deflationary gaps
- The multiplier and accelerator concepts
- Business cycles/cyclical fluctuations
4.2.2 Economic growth, economic development and economic planning
- The differences between economic growth and economic development
- Actual and potential growth
- The benefits and costs of economic growth
- Determinants of economic development
4 www.mykasnebnotes.com contact:0713440925
PART 1
CPA SECTION 2
CCP SECTION 2
CIFA SECTION 2
CS SECTION 2
STUDY NOTES
,GENERAL OBJECTIVES
This paper is intended to equip the candidate with knowledge, skills and attitudes that will enable
him/her to apply the fundamental principles of economics in decision making
4.0 LEARNING OUTCOMES
A candidate who passes this paper should be able to:
• Apply basic mathematical and graphical techniques to analyse economic relationships
and interpret the results
• Apply the knowledge of economics in decision making
• Analyse economic problems and suggest possible policy related recommendations
• Apply knowledge of economics in international trade and finance
• Apply economic principles in the development and implementation of policies in
agriculture and industry
• Demonstrate an understanding of emerging economic issues.
CONTENT
4.1 Microeconomics
4.1.1 Introduction to economics
- Definition of economics
- Micro and macro economics
- The methodology of economics and its basic concepts
- Economic descriptions and analysis
- Scarcity, choice, opportunity cost and production possibility frontiers and curves
- Economic systems: free economy, planned economy and mixed economy
- Specialisation and exchange
4.1.2 Demand, supply and determination of equilibrium
4.1.2.1 Demand analysis
- Definition
- Individual demand versus market demand
- Factors influencing demand
- Exceptional demand curves
- Types of demand
- Movement along and shifts of demand curves
- Elasticity of demand
- Types of elasticity: price, income and cross elasticity
- Measurement of elasticity; point and arc elasticity
2 www.mykasnebnotes.com contact:0713440925
, - Factors influencing elasticity of demand
- Application of elasticity of demand in management and economic policy decision making
4.1.2.2 Supply analysis
- Definition
- Individual versus market supply
- Factors influencing supply
- Movements along and shifts of supply curves
- Definition of elasticity of supply
- Price elasticity of supply
- Factors influencing elasticity of supply
- Application of elasticity of supply in management and economic policy decision making
4.1.2.3 Determination of equilibrium
- Interaction of supply and demand, equilibrium price and quantity
- Mathematical approach to equilibrium analysis
- Stable versus unstable equilibrium
- Effects of shifts in demand and supply on market equilibrium
- Price controls
- Reasons for price fluctuations in agriculture
4.1.3 The theory of consumer behaviour
- Approaches to the theory of the consumer- cardinal versus ordinal approach
- Utility analysis, marginal utility (MU), law of diminishing marginal utility (DMU)
- Limitations of cardinal approach
- Indifference curve analysis
- Budget line
- Consumer equilibrium; effects of changes in prices and incomes on consumer
equilibrium
- Derivation of a demand curve
- Applications of indifference curve analysis: substitution effect and income effect for a
normal good, inferior good and a giffen good; derivation of the Engels curve
- Consumer surplus
4.1.4 The theory of a firm
4.1.4.1 The theory of production
- Factors of production
- Mobility of factors of production
- Production function analysis
- Short run analysis
- Total product, average and marginal products
- Stages in production and the law of variable proportions/ the law of diminishing returns
- Long run analysis
3 www.mykasnebnotes.com contact:0713440925
, - Isoquant and isocost lines
- The concept of producer equilibrium and firm's expansion curve
- Law of returns to scale
- Demand and supply of factors of production
- Wage determination theories
- Trade unions: functions and challenges
- Producer surplus/economic rent
4.1.4.2 The theory of costs
- Short run costs analysis and size of the firm's total cost, fixed cost, average cost, variable
costs and marginal cost
- Long run costs analysis
- Optimal size of a firm
- Economies and diseconomies of scale
4.1.5 Market structures
- Definition of a market
- Necessary and sufficient conditions for profit maximisation
- Mathematical approach to profit maximisation
- Output, prices and efficiency of: perfect competition, monopoly, monopolistic
competition, oligopolistic competition
4.2 Macroeconomics
4.2.1 National income
- Definition of national income
- Circular flow of income
- Approaches to measuring national income
- Concepts of national income: gross domestic product (GDP), gross national product
(GNP) and net national product (NNP), net national income (NNI) at market price and
factor cost, disposable income
- Problems of measurement; uses of national income statistics and their limitations
- Analysis of consumption, saving and investment and their interaction in a simple
economic model
- Determination of equilibrium national income
- Inflationary and deflationary gaps
- The multiplier and accelerator concepts
- Business cycles/cyclical fluctuations
4.2.2 Economic growth, economic development and economic planning
- The differences between economic growth and economic development
- Actual and potential growth
- The benefits and costs of economic growth
- Determinants of economic development
4 www.mykasnebnotes.com contact:0713440925
