Cpa Syllabus 2009:

CPA Syllabus 2009:

Economics and the Business Environment

Stage: Formation 1 Subject Title: Economics and the Business Environment Examination Duration: 3 Hours Aim The aim of this subject is to ensure that students have a solid foundation in economics contributing to the development of a competent and wellrounded member of the profession. This subject embraces a knowledge of the sources, interpretations and limitations of economic/business statistics.

Economics and the Business Environment as an Integral Part of the Syllabus Economics is an essential foundation subject for the professional accountant. This will equip students to develop their knowledge, understanding and analysis of the economic environment and application of economic concepts. Knowledge gained from this subject will be particularly relevant when studying Management Accounting, Managerial Finance, Strategic Performance Management, Strategic Corporate Finance, and Strategy, Leadership and Knowledge Management.

Stage

Subject

Subject

Subject

Subject

Subject

Subject

P2

Strategic Corporate Finance

Strategic Performance Management Managerial Finance Management Accounting Business Mathematics & Quantitative Methods

Advanced Corporate Reporting Corporate Reporting Financial Accounting Economics & The Business Environment

Strategy Leadership & Knowledge Management Corporate Laws and Governance Information Systems Business Laws

Audit Practice and Assurance Services Auditing

Advanced Taxation

P1 F2 F1

Taxation

The above table shows the linkages between Economics and the Business Environment and the subjects highlighted. The capabilities developed will be built upon in the study of the subjects highlighted above.

On successful completion of this subject students should be able to:

• Discuss and analyse the factors determining the contribution of various resources to the firm’s revenue.

• Explain economic concepts and terms and their uses and application.

• Explain the upper and lower limits to income determination and the distribution of economic rents.

• Explain the market environment and income determination.

• Explain the national economic parameters within which business is conducted.

Learning Outcomes

• Analyse and discuss the impact of government policy and international economic institutions on economic issues. • Apply micro economic techniques to interpret and explain business and consumer behaviour. • Describe the modifying and opportunistic aspect of the particular market environment in which a firm operates.

• Discuss the interrelationship of the various sectors within the economy. • Describe the factors governing the operation of financial institutions and the significance of these for economic activity. • Discuss the global forces that influence the open Irish economy.

Syllabus 1: CONCEPTS

CL*

• Supply and demand. • Determination of price. • Equilibrium. • Market systems and the allocation of scarce resources.

2 2 2 2

• Concepts of cost –opportunity, fixed, variable, marginal, average.

2

• Time aspect –short run, long run.

2 2

• Aspect of size –economies and diseconomies of scale, economies of scope. • Implications of various elasticity concepts.

*

2

CL: Competency Level

14

CPA Syllabus 2009:

2: THE FIRM IN THE MARKET PLACE

Economics and the Business Environment

Income statistics GNP/GDP/National Income. • Accelerator and Multiplier.

• The concept of profit maximisation. • The conditions for long run profit maximisation.

2 2

• The conditions for short run profit maximisation.

2

• An understanding of the various forms of market structures - Perfect Competition, Monopolistic (Imperfect) Competition, and Monopoly.

2

• Long run price/output determination for each of the above forms of market structure.

2

• Economic efficiency in respect of each of these forms of market structure.

2

2

Examination Format

7: GOVERNMENT AND THE MACROECONOMY. • Objectives of national economic policy.

2

• Interaction of objectives.

2

• Policy instruments. • Economic cycles. • Budget strategies. • Fiscal stabilisers. • Economic implications of direct and indirect forms of taxation.

2 2 2 2

8: MONEY AND BANKING. 3: INFLUENCE OF COMPETITORS ON BEHAVIOUR OF FIRMS • Strategic Rivalry. • Oligopoly and interdependence. • Natural and strategic entry barriers. • Kinked demand curves.

2 2 2 2

4: GROWTH STRATEGIES OF FIRMS • • • • • •

Horizontal growth. Vertical growth. Diversified growth. Growth by merger. Economies of scope. Profit maximisation objective when management is separate from ownership. • Alternative theories of the firm. • Principal –agent theory.

2 2 2 2 2 2 2 2

• Development of the money economy. • Functions of money. • Credit creation by the banking sector. • Money multiplier. • European Central Banking. • Monetary policy/Exchange rate policy. • Interest Rates and the macroeconomy.

• Terms of trade. • Restrictions to free international trade.

5: FACTOR MARKETS AND INCOME DETERMINATION. • Marginal productivity theory. • Wage determination. • Rent, interest and profit. • Economic rents.

6: THE MACROECONOMIC ENVIRONMENT. • The circular flow of income. • Potential and actual levels of aggregate demand.

2 2

• National Income determination in an open economy with government.

2

• Interrelationship between National

2

2 2

2

Marks:

Compulsory Question

40

(10 Marks are allocated to each part of the question) Choice of 3 questions out of 4,

60 Total:100

Booklist Core Texts David Begg and Damian Ward / Economics for Business / (McGraw-Hill 2004) / ISBN 0077104293.

2 2 2

• Balance of payments.

2 2 2

• The pattern of international trade flows.

Students are required to answer 3 of the remaining 4 questions.

(Each question allocated 20 marks)

2 2 2

2

• Economic benefits to a firm from a global strategy.

2 2 2 2

2

• Fixed versus floating exchange rates. • The global market environment.

The examination is unseen, closed book and 3 hours in duration. Question 1 is compulsory but there is an element of choice within the question in that students are required to answer 4 of the 5 sections. This compulsory question is drawn from various parts of the syllabus in order to provide an indication of the students' overall understanding of the subject.

Marks Allocation

9: GLOBAL ECONOMICS. • Law of comparative advantage.

In answering all questions, students are expected to convey, unambiguously, the required information.

McDowell, Thom, Frank & Bernanke. / Principles of Economics, (European Edition) / (McGraw-Hill 2006 Edition) / ISBN: 0077108310. Leddin & Walsh / The Macroeconomy of the Eurozone /(Gill & Macmillan) / ISBN 9780717134922 (This book deals with the applied side of government thinking). European and Monetary Union (a pamphlet which may be purchased only from the CPA Institute).

Manuals

2

Supplementary Texts AccountancyPlus

Assessment Strategy

CPA students’ eBulletin

Examination Approach

Useful Websites

Students have, through both narrative and problem-based questions, the opportunity to demonstrate their understanding and application of key economic concepts, within both the domestic and global economic environments. Where appropriate, students are expected to evaluate alternative possibilities and apply their knowledge to specified or illustrative problems.

(as at date of publication)

15

www.cpaireland.ie Institute of Certified Public Accountants in Ireland www.centralbank.ie - Central Bank of Ireland www.irlgov.ie/finance - Department of Finance www.esri.ie Economics and Social Research Institute www.ecb.int/ - European Central Bank www.europa.eu/ - European Union www.neweconomics.org/gen/ - New Economics Forum.