CAF 2 – Introduction to Economics & Finance

By Muhammad Aamir
Introduction to Economics & Finance (CAF-2) paper is one of the building block of Chartered Accountancy qualification. Beside its importance from exam view point, 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 view point, 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 come up with 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 fail to present answers adequately.


  • Comprehensive Course Coverage
  • Lecture explanation through daily life examples
  • Detailed week-wise study plans
  • All-inclusive detailed 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 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.



  • Differeence b/w MICRO & MACRO economics
  • Definitions of economics as given by different economists
  • Relating economics definitions with daily life activities
  • Concept of wealth; its types and ownership
  • Capital & steps involved in its formation
  • Entrepreneurship & qualities of successful entrepreneur
  • Introduciton to economics systems and major functions
  • Salient features of planned, mixed, market economy & Islamic economic system.



  • Concept of demand in economics
  • Law of Demand & assumptions of the law.
  • Concept of movement along demand curve & shift in demand curve.
  • Practical importance of law of demand
  • Concept of elasticity of demand
  • Different kinds of elasticities (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 & assumptions of the law.
  • Concept of movement along supply curve & shift in supply curve.
  • Practical importance of law of supply
  • Concept of 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
  • Limitaions of law of equi marginal utility
  • Practical importance of above 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 competiton
  • Nature of revenues under different competition
  • Charateristics of perfect and imperfect competition
  • Characteristics of Monoploy, Monopolistics & Oligopoly
  • Equilibrium of firms under perfect competition while earning Normal, Supernormal & Sub-Normal profits
  • Equilibrium of firms under imperperfect competition in monopoly and monopolistic situation while earning diff profits
  • Price determination under oligopoly
  • Collusive and Non-Collusive oligopolies
  • Success and failure of cartels


National Income

  • National Income and different concepts (GDP, DNP, NNP, P.I, DPI)
  • Cricular Flow of National Income including Injections & Withdrawls
  • 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

  • Define consumption and savings
  • Consumption and Savings functions
  • Concepts of APC / MPC / APS / MPS and calculations
  • Keynes pshchologocal law of consumption and its assumptions
  • Determinants of savings and consumptions
  • Shift in savings and consumption function


  • Definition of investment in economic sense
  • Different types of investments (Induced & Autonomous), examples and graphs
  • 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 is limitations
  • Comprehend the principle of acceleration and its assumptions
  • Understand how the multiplier and accelerator interact and cause fluctuations in output.

Inflation & Unemployment

  • Understand concepts of inflation, deflation, stag-flation, wage spiral inflation, mild and hyperinflation
  • Explain the causes of inflation and measures to overcome inflation with special reference to Pakistan
  • Discuss the cost of inflation and Phillips Curve.
  • Describe the concept of unemployment, full employment and types of unemployment
  • Discuss the measures to reduce unemployment

Monetary & Fiscal Policy

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


  • Define direct, indirect, proportional, progressive and regressive taxation
  • Understand functions of taxation, types of taxes and characteristics of good tax policy
  • Canons of taxation
  • Advantages and Disadvantages of direct & indirect taxation

Public and Private Finance

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

Banking System

  • Define a bank and describe its kinds
  • Describe the functions of a central bank.

Money & Exchange Rate

  • Define the term “Money”, describe its evolution, functions and the various forms it takes
  • Define interest rate, describe its types and also explain the determinants of interest rate
  • Quantity theory of money
  • Keynesian liquidity preference theory and Keynesian liquidity trap and define their role in determining interest rates.
  • Measurement of the value of money
  • Explain the concept of exchange rate, its determination and government’s policy to influence it.

Financial Markets

  • Describe the main features and objectives of capital, money & derivative markets.
  • Instruments used under each of above markets.

International Trade

  • Distinguish between balance of trade and balance of payment
  • Understand the different parts of balance of payment
  • Explain the reasons of balance of payment deficit and measures to rectify it with special reference to Pakistan
  • Explain the concept of J curve and inverse J curve


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