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CAF 2 – Introduction to Economics & Finance (Crash Course/Sept 2021)

By Muhammad Aamir
Introduction to Economics & Finance (CAF-2) paper is one of the building blocks of Chartered Accountancy qualification. Beside its importance from exam viewpoint, economics is very much related to practical life.


Introduction to Economics & Finance (CAF-2) paper is one of the building block of Chartered Accountancy qualification. Beside its importance from exam viewpoint, economics is very much related to practical life. At its core, economics is the study of how individuals, groups and nations manage and use resources. Students who choose to study economics not only gain the skills needed to understand complex issues, but also develop strong analytical and problem-solving skills, as well as business acumen necessary to succeed in the professional world. In fact, economics is useful for professionals in all types of industries.

CAF-2 paper not only requires theoretical knowledge but also stirs students’ analytical skills. It has been observed that most of the students underperform due to lack of understanding of core concepts; in addition, it has been highlighted that students struggle to present answers adequately.


  • Comprehensive course coverage
  • Lecture explanation through daily life examples
  • Weekly study plans
  • Detailed preparatory notes and study material
  • Engaging lectures recorded and updated on Learning Glass Board
  • Past papers practice and paper presentation methods
  • Sufficient no. of MCQs on each topic (with explanation of correct option)
  • 3 full-length mock tests



Sir Ammad Ali

Muhammad Aamir

Muhammad Aamir is a Fellow Member of Institute of Cost & Management Accountants of Pakistan (ICMAP) with cumulative experience of 10+ years in the profession. He is an M.Phil in Economics & Finance; in addition, he is also Certified Internal Control Auditor. His diverse academic & professional background from economics, finance and audit gives him a unique & captivating teaching skill which in turn enhances students’ learning experience.

Previously, he has worked with KPMG (Audit & Advisory section) and was also associated with Mutual Fund sector of Atlas Group as Manager Finance. Currently Muhammad Aamir is associated with one of private sector university as an Assistant Professor in Management & Economics department. As a facilitator, his objective is to enable students to develop ability of critical thinking & logical reasoning so that intellectual broadening can be inculcated in them.



  • Difference b/w Micro & Macro economics
  • Various definitions of economics as given by different economists
  • Relating economics definitions with daily life activities
  • Concept of wealth; its types and ownership
  • Capital & its step-by-step formation
  • Entrepreneurship & qualities of a successful entrepreneur
  • Introduction to economic systems and major functions
  • Salient features of planned, mixed, market economy & Islamic economic system



  • Concept of demand in economics
  • Law of demand & its assumptions
  • Movement along & shift in the demand curve
  • Practical importance of law of demand
  • Elasticity of demand
  • Types of elasticity (Price/Income/Cross)
  • Calculation of various elasticities
  • Determinants & importance of different elasticities of demand
  • Application of elasticity in business world for price and revenues determination


  • Difference b/w Stock & Supply
  • Law of Supply & its assumptions
  • Movement along & shift in the supply curve
  • Practical importance of law of supply
  • Elasticity of supply
  • Calculation of elasticity of supply
  • Determinants & importance of elasticity of supply


  • Equilibrium of demand & supply
  • Effect of changes in demand & supply on equilibrium price
  • Equilibrium market of perishable goods

Consumer Behaviour

  • Cardinal Utility Analysis
  • Utility and its relation with consumption
  • Law of diminishing marginal utility
  • Assumptions and Limitations of law
  • Law of equi-marginal utility
  • Limitations of law of equi-marginal utility
  • Practical importance of these laws
  • Ordinal Utility Analysis
  • Concept of MRS
  • Derivation of Indifference curve from MRS
  • Characteristics of Indifference curves
  • Consumer equilibrium through indifference curve
  • Changes in consumer equilibrium through Income & Price effects
  • Substitution effect in consumer equilibrium


  • Types of firm’s products (TP/AP/MP)
  • Difference b/w fixed & variable factors of production
  • Different types of costs of production
  • Laws of returns & Laws of costs
  • Law of variable proportion

Costs & Revenues

  • Different classification of costs (Explicit/Implicit/Average/Marginal)
  • Deriving different cost curves
  • Type of firms’ revenues (TR/AR/MR)
  • Different types of profits earned by firms (Normal/Super Normal/ Sub-Normal)

Market Structure

  • Types of markets, firms operating in.
  •         – According to time
  •         – According to location
  •         – According to competition
  • Nature of revenues under different competition
  • Characteristics of perfect and imperfect competition
  • Characteristics of Monopoly, Monopolistic & Oligopoly
  • Equilibrium of firms under perfect competition while earning Normal, Supernormal & Sub-Normal profits
  • Equilibrium of firms under imperfect competition in monopoly and monopolistic situation while earning different profits
  • Price determination under oligopoly
  • Collusive and Non-Collusive oligopolies
  • Success and failure of cartels


National Income

  • National Income
  • National Income and different concepts (GDP, DNP, NNP, PI, DPI)
  • Circular flow of National Income including Injections & Withdrawals
  • Different approaches for measuring National Income (Income, Expenditure & Output methods)
  • Major difficulties in measuring National Income
  • Significance of measuring National Income
  • Different phases of business cycle – (indicators of growth & recession)

Consumption & Savings

  • Definition of consumption and savings
  • Functions of consumption and savings
  • Definitions and calculations of APC / MPC / APS / MPS
  • Keynes psychological law of consumption and its assumptions
  • Determinants of savings and consumptions
  • Shift in savings and consumption function


  • Definition of investment in economics
  • Types of investments (Induced & Autonomous)
  • Determinants of Induced Investments (MEC & Rate of Interest)
  • Relationship of investment with marginal efficiency of capital and interest rate
  • Factors of MEC and Interest Rate

Multiplier & Accelerator

  • Comprehend the effect of the multiplier on the level of national income and its limitations
  • Principle of acceleration and its assumptions
  • Effects of interaction of the Multiplier and Accelerator on the output

Inflation & Unemployment

  • Concepts of inflation, deflation, stag-flation, wage spiral inflation, mild and hyperinflation
  • Causes of inflation and measures to overcome inflation with special reference to Pakistan
  • Cost of inflation and Phillips Curve
  • Unemployment, full employment and types of unemployment
  • Measures to reduce unemployment

Monetary & Fiscal Policy

  • Objectives of monetary & fiscal policy
  • Achievement of objectives and conflicts


  • Direct, indirect, proportional, progressive and regressive taxation
  • Functions of taxation, types of taxes and characteristics of a good tax policy
  • Canons of taxation
  • Advantages and disadvantages of direct & indirect taxation

Public and Private Finance

  • Difference b/w public and private finance
  • Functions of public finance
  • Role of public expenditure in developing countries with special reference to Pakistan.

Banking System

  • Definition and types of Bank
  • Functions of a central bank.

Money & Exchange Rate

  • Money & Exchange Rate
  • Definition, evolution, functions and forms of Money
  • Definition, types ad determinants of interest rate
  • Quantity theory of money
  • Keynesian liquidity preference theory and Keynesian liquidity trap and their role in determining interest rates
  • Measurement of the value of money
  • Definition and determinants of exchange rate and government’s policy to influence it

Financial Markets

  • Main features and objectives of capital, money & derivative markets
  • Instruments used under each of above markets

International Trade

  • Differences b/w balance of trade and balance of payment
  • Components of balance of payment
  • Reasons of balance of payment deficit and measures to rectify it with special reference to Pakistan
  • J curve and inverse J curve