INTRODUCTION TO ECONOMICS AND FINANCE

Candidates appeared to be lacking in conceptual understanding of this subject. Cramming and rote memorization are not the right tool to pass professional examinations.

Q.1

Performance was above average being easy question. It was observed that many students wasted their time in stating unasked merits and demerits of the mixed economy.

Q.2

(a)

Very few candidates knew that quantity of one commodity must be decreased to have increased quantity of another commodity to maintain same level of satisfaction, which makes the indifference curve negatively slopped.

(b)

Many students wrongly related the implication of positively slopped indifference curve with the level of income, while a positively sloped curve implies that a consumer does not prefer more to less, which is against the basic concept of indifference curve theory.

(c)

The question was answered by majority without properly looking at the requirement. Income and substitution effect of a price increase was asked, while candidates presented two effects (a) in case of change in price of both goods and (b) in case of change in income of the consumer. Some who did it correctly missed the compensated budget line.

Q.3

(a)

An easy definition of opportunity cost was asked and students secured good marks.

(b)

The students seemed to be familiar with the law of diminishing marginal utility. However, many candidates lacked lucidity about the limitations of the law.

Q.4

Under certain conditions the monopoly price is even lower than the competitive price. It was required to discuss those circumstances, but only few could do it with this approach. Majority tried to explain the irrelevant points of price mechanism of perfect and imperfect market covering pages for no gain.

Q.5

(a)

This was a straight and rudimentary question and was responded correctly.

(b)

Understanding of trade cycle in context with the effect of multiplier and accelerator in combination was asked. Most of the candidates muddled it with separate discussion on both theories gaining fraction of reserved marks.

Q.6

This was also an elementary level question. Almost every student was fully conversant with the definition of the fiscal policy and its objective. Few students mixed up the objective of fiscal policy with that of monetary policy and some presented unasked details of implementation of fiscal policy.

Q.7

Though general in nature and simple too, the question was not answered as it should have been. A number of candidates failed to explain the proper definition of economic growth. Some students repeated the objectives of fiscal policy under the heading of objectives of economic growth. Essential requisites of economic growth remained unattended by many students.

Q.8

(a)

Candidates involved application of general knowledge of government priority of various expenditure. A good number mentioned only the points giving the least explanation of those, even those points were sometimes off the mark.

(b)

Many candidates answered social, political, financial and economical factors that hamper foreign investment in Pakistan, but lacked clarity in comprehending it.

Q.9

This question was either not attempted at all or performed badly as sources of fund available to a corporate entity was not known to majority, and the sources quoted by candidates were appeared to be the guesswork in many cases.

Q.10

(a)

This was an easy question and students showed their awareness of role of State Bank of Pakistan as banker to the government. Many students also discussed the other functions of SBP, which was not required.

(b)

In this part, performance of the students was below average. They did not discuss the role of capital market for development of infrastructure and agriculture and industrial sector etc. Un-necessary details of features of stock exchange, gilts, banks and national savings given by some candidates gained no reward.