i
PAPER NO. 3
ECONOMICS
DISTANCE LEARNING PACK
COPYRIGHT
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 prior written permission of the copyright owner.
This publication may not be lent, resold, hired or otherwise disposed off by any way of trade
without the prior written consent of the copyright owner
THE REGISTERED TRUSTEES STRATHMORE EDUCATION TRUST 1996
STRATHMORE UNIVERSITY ● STUDY PACK
,ii Acknowledgement
ACKNOWLEDGEMENT
We gratefully acknowledge permission to quote from the past examination papers of the
following bodies: Kenya Accountants and Secretaries National Examination Board
(KASNEB); Chartered Institute of Management Accountants (CIMA); Chartered
Association of Certified Accountants (ACCA)
We also wish to express our sincere gratitude and deep appreciation to Mr Robert
Mudida MA (International Studies), MSc Economics, B.A (Econ) Second Class
Upper , currently pursuing his PhD in International Studies at the University of
Nairobi. He is a senior lecturer at Strathmore University, School of Accountancy. He
has generously given his time and expertise and skilfully co-ordinated the detailed effort of
reviewing this study pack.
ECONOMICS
,Instructions for students iii
INSTRUCTIONS FOR STUDENTS
This study guide is intended to assist distance learning students in their independent studies.
The course has been broken down into eight lessons each of which should be considered as
approximately one week of study for a full time student. Solve the reinforcement problems
verifying your answer with the suggested solution contained at the back of the distance learning
pack. When the lesson is completed, repeat the same procedure for each of the following
lessons.
At the end of lessons 2, 4, 6, and 8 there is a comprehensive assignment that you should
complete and submit for marking to the distance learning administrator.
SUBMISSION PROCEDURE
1. After you have completed a comprehensive assignment clearly identify each question and
number your pages.
2. If you do not understand a portion of the course content or assignment question, indicate
this in your answer so that your marker can respond to your problem areas. Be as specific
as possible.
3. Arrange the order of your pages by question number and fix them securely to the data
sheet provided. Adequate postage must be affixed to the envelope.
4. While waiting for your assignment to be marked and return to you, continue to work
through the next two lessons and comprehensive assignment.
On the completion of the last comprehensive assignment, a two week period of revision should
be carried out of the whole course using the material in the revision section of the study pack.
At the completion of this period the final Mock Examination period should be completed
under examination conditions. This should be sent to the Distance Learning Administrator to
arrive in Nairobi at least five weeks before the date of your sitting the KASNEB Examinations.
This paper will be marked and posted back to you within two weeks of receipt of the Distance
Learning Administrator.
STRATHMORE UNIVERSITY ● STUDY PACK
, iv Contents
Contents
ACKNOWLEDGEMENT .................................................................................................. ii
INSTRUCTIONS FOR STUDENTS................................................................................. iii
CONTENTS ....................................................................................................................... iv
ECONOMICS COURSE DESCRIPTION ........................................................................ v
ECONOMICS INDEX ....................................................................................................... vi
LESSON ONE .................................................................................................................... 1
INTRODUCTION TO ECONOMICS .............................................................................................. 1
LESSON TWO .................................................................................................................... 18
ELEMENTARY THEORIES OF DEMAND AND SUPPLY AND THE THEORY OF
CONSUMER BEHAVIOUR ................................................................................................................ 18
LESSON THREE ............................................................................................................... 62
THE THEORY OF PRODUCTION ................................................................................................. 62
LESSON FOUR .................................................................................................................. 103
NATIONAL INCOME ANALYSIS ................................................................................................... 103
LESSON FIVE .................................................................................................................... 133
MONEY AND BANKING................................................................................................................... 133
LESSON SIX ....................................................................................................................... 161
LABOUR AND UNEMPLOYMENT ................................................................................................ 161
LESSON SEVEN ................................................................................................................ 185
PUBLIC FINANCE AND INFLATION ........................................................................................... 185
LESSON EIGHT ................................................................................................................ 206
INTERNATIONAL TRADE AND FINANCE .............................................................................. 206
LESSON NINE................................................................................................................... 236
REVISION AID…………………………………………………………………………236
ECONOMICS
PAPER NO. 3
ECONOMICS
DISTANCE LEARNING PACK
COPYRIGHT
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 prior written permission of the copyright owner.
This publication may not be lent, resold, hired or otherwise disposed off by any way of trade
without the prior written consent of the copyright owner
THE REGISTERED TRUSTEES STRATHMORE EDUCATION TRUST 1996
STRATHMORE UNIVERSITY ● STUDY PACK
,ii Acknowledgement
ACKNOWLEDGEMENT
We gratefully acknowledge permission to quote from the past examination papers of the
following bodies: Kenya Accountants and Secretaries National Examination Board
(KASNEB); Chartered Institute of Management Accountants (CIMA); Chartered
Association of Certified Accountants (ACCA)
We also wish to express our sincere gratitude and deep appreciation to Mr Robert
Mudida MA (International Studies), MSc Economics, B.A (Econ) Second Class
Upper , currently pursuing his PhD in International Studies at the University of
Nairobi. He is a senior lecturer at Strathmore University, School of Accountancy. He
has generously given his time and expertise and skilfully co-ordinated the detailed effort of
reviewing this study pack.
ECONOMICS
,Instructions for students iii
INSTRUCTIONS FOR STUDENTS
This study guide is intended to assist distance learning students in their independent studies.
The course has been broken down into eight lessons each of which should be considered as
approximately one week of study for a full time student. Solve the reinforcement problems
verifying your answer with the suggested solution contained at the back of the distance learning
pack. When the lesson is completed, repeat the same procedure for each of the following
lessons.
At the end of lessons 2, 4, 6, and 8 there is a comprehensive assignment that you should
complete and submit for marking to the distance learning administrator.
SUBMISSION PROCEDURE
1. After you have completed a comprehensive assignment clearly identify each question and
number your pages.
2. If you do not understand a portion of the course content or assignment question, indicate
this in your answer so that your marker can respond to your problem areas. Be as specific
as possible.
3. Arrange the order of your pages by question number and fix them securely to the data
sheet provided. Adequate postage must be affixed to the envelope.
4. While waiting for your assignment to be marked and return to you, continue to work
through the next two lessons and comprehensive assignment.
On the completion of the last comprehensive assignment, a two week period of revision should
be carried out of the whole course using the material in the revision section of the study pack.
At the completion of this period the final Mock Examination period should be completed
under examination conditions. This should be sent to the Distance Learning Administrator to
arrive in Nairobi at least five weeks before the date of your sitting the KASNEB Examinations.
This paper will be marked and posted back to you within two weeks of receipt of the Distance
Learning Administrator.
STRATHMORE UNIVERSITY ● STUDY PACK
, iv Contents
Contents
ACKNOWLEDGEMENT .................................................................................................. ii
INSTRUCTIONS FOR STUDENTS................................................................................. iii
CONTENTS ....................................................................................................................... iv
ECONOMICS COURSE DESCRIPTION ........................................................................ v
ECONOMICS INDEX ....................................................................................................... vi
LESSON ONE .................................................................................................................... 1
INTRODUCTION TO ECONOMICS .............................................................................................. 1
LESSON TWO .................................................................................................................... 18
ELEMENTARY THEORIES OF DEMAND AND SUPPLY AND THE THEORY OF
CONSUMER BEHAVIOUR ................................................................................................................ 18
LESSON THREE ............................................................................................................... 62
THE THEORY OF PRODUCTION ................................................................................................. 62
LESSON FOUR .................................................................................................................. 103
NATIONAL INCOME ANALYSIS ................................................................................................... 103
LESSON FIVE .................................................................................................................... 133
MONEY AND BANKING................................................................................................................... 133
LESSON SIX ....................................................................................................................... 161
LABOUR AND UNEMPLOYMENT ................................................................................................ 161
LESSON SEVEN ................................................................................................................ 185
PUBLIC FINANCE AND INFLATION ........................................................................................... 185
LESSON EIGHT ................................................................................................................ 206
INTERNATIONAL TRADE AND FINANCE .............................................................................. 206
LESSON NINE................................................................................................................... 236
REVISION AID…………………………………………………………………………236
ECONOMICS
