Kasneb CPA1 Section 2 Economics Notes Download
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
LEARNING OUTCOMES
- 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.
CONTENTS
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
– 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 behavior
– 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 given 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
