INSTITUTE OF CERTIFIED
PUBLIC ACCOUNTANTS
OF RWANDA
CPA
F2.2
ECONOMICS AND
THE BUSINESS
ENVIRONMENT
Study Manual
2nd edition February 2020,
, © ICPAR
All copy right reserved
All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in
any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior written
permission of ICPAR.
Acknowledgement
We wish to officially recognize all parties who contributed to revising and updating this Manual, Our thanks are extended
to all tutors and lecturers from various training institutions who actively provided their input toward completion of this
exercise and especially the Ministry of Finance and Economic Planning (MINECOFIN) through its PFM Basket Fund
which supported financially the execution of this assignment
,INSTITUTE OF CERTIFIED PUBLIC
ACCOUNTANTS OF RWANDA
Foundation F2
F2.2 ECONOMICS AND THE BUSINESS
ENVIRONMENT
2nd Edition February 2020
This Manual has been fully revised and updated in accordance with the current syllabus/
curriculum. It has been developed in consultation with experienced tutors and lecturers.
, Table Of Contents
Unit Title Page
Introduction to the course 6
Level: foundation 2 6
Subject title: f2.2 Economics and the business environment 6
1. Concepts 7
The meaning economics 8
Economic system 9
Types of economic systems 9
Supply and demand. Elasticity of demand and supply 12
Influences on demand 13
Price elasticity of demand 16
Further demand elasticities 19
Price elasticity of supply 25
Basic economic problems and systems 32
Some assumptions relating to the market economy 34
2. Consumer behavior and welfare economics 36
Theory of consumer behavior 37
Utility 38
Indifference curves 40
The effect of a price change 53
Consumer surplus 61
3. The firm in the market place 62
Meaning and levels of production (primary, secondary And tertiary or service 63
Factors of production 63
Revenue and revenue changes 74
Total, average and marginal product 80
2 F2.2 Economics & The business CPA EXAMINATION
Environment STUDY MANUAL
PUBLIC ACCOUNTANTS
OF RWANDA
CPA
F2.2
ECONOMICS AND
THE BUSINESS
ENVIRONMENT
Study Manual
2nd edition February 2020,
, © ICPAR
All copy right reserved
All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in
any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior written
permission of ICPAR.
Acknowledgement
We wish to officially recognize all parties who contributed to revising and updating this Manual, Our thanks are extended
to all tutors and lecturers from various training institutions who actively provided their input toward completion of this
exercise and especially the Ministry of Finance and Economic Planning (MINECOFIN) through its PFM Basket Fund
which supported financially the execution of this assignment
,INSTITUTE OF CERTIFIED PUBLIC
ACCOUNTANTS OF RWANDA
Foundation F2
F2.2 ECONOMICS AND THE BUSINESS
ENVIRONMENT
2nd Edition February 2020
This Manual has been fully revised and updated in accordance with the current syllabus/
curriculum. It has been developed in consultation with experienced tutors and lecturers.
, Table Of Contents
Unit Title Page
Introduction to the course 6
Level: foundation 2 6
Subject title: f2.2 Economics and the business environment 6
1. Concepts 7
The meaning economics 8
Economic system 9
Types of economic systems 9
Supply and demand. Elasticity of demand and supply 12
Influences on demand 13
Price elasticity of demand 16
Further demand elasticities 19
Price elasticity of supply 25
Basic economic problems and systems 32
Some assumptions relating to the market economy 34
2. Consumer behavior and welfare economics 36
Theory of consumer behavior 37
Utility 38
Indifference curves 40
The effect of a price change 53
Consumer surplus 61
3. The firm in the market place 62
Meaning and levels of production (primary, secondary And tertiary or service 63
Factors of production 63
Revenue and revenue changes 74
Total, average and marginal product 80
2 F2.2 Economics & The business CPA EXAMINATION
Environment STUDY MANUAL
