I am having trouble with econ in general. I only briefly touched on Econ in school as a finance major. Using Elan Guides practice problems, I can guess about a 40-50% on all the questions. Should I spend more time on this topic? I havent even touched fixed income yet.
Also forgot to note that for the most part up until Econ everything has been a review of what I learned in school. But for Econ, I will have to learn as if it was new knowledge to me.
The most important topic in Econ is marginal revenue product: the idea that you maximize your profit when the ratio of marginal revenue product to input price for all inputs is the same:
MRP1/P1 = MRP2/P2 = . . . = MRP_n_ / P_n_
That is, it’s the most important if you can apply it to your studying for the Level I CFA exam.
Q. What’s your marginal revenue product (from studying)?
A. The expected number of additional points that you’ll earn on the Level I CFA exam.
Q. What’s the input price?
A. The number of hours you spend studying.
Q. How do you maximize your profit (the total number of points you expect to earn on the exam)?
A. By adjusting your studying until you get the same number of additional expected points per hour of studying, no matter whether you’re studying Ethics, Quant, Econ, FRA, Corporate Finance, Equity, Fixed Income, Derivatives, Alternative Investments, or Portfolio Management.
Q. Huh?
A. If you’re lousy at Econ, and if 20 extra hours of studying Econ would increase your expected score by 3 points, but you’re better at FRA and 20 extra hours of studying FRA would increase your expected score by 10 points, then stop studying Econ and start studying FRA. Note that the increase in your expected score varies directly with the weight of the topic in the curriculum, and inversely with the difficulty you have in understanding the topic: spend less time studying hard or low-weight topics, more time studying easy or high-weight topics.
I can tell you I was in the same boat at L1 and decided to punt on Econ - too much material for the amount of questions you could see on test day. Fixed income is significantly less material, easier to absorb, and accounts for a greater portion of the exam so move there and then focus on FRA like S2000Magician suggests. Punting on Econ at L1 caused me to score lowest in this section, but I was totally confident in the other sections and left the exam riding high.
Thanks for the responses guys. Econ just looked like gibberish to me. I am going to go hard on the other topics. A little more on quant and fixed income/ equity. Ill try to learn econ whenever I have some down time.