CB2 Business Economics
Microeconomics and macroeconomics applied to insurance, pensions, and financial services markets.
About CB2
CB2 gives actuaries the economic framework to understand the markets and regulatory environments in which they work. Why do interest rates affect insurance pricing? Why does economic growth matter for pension funding? Why is insurance prone to market failure? CB2 answers these questions and makes you a better communicator with economists, regulators, and non-actuarial colleagues.
Who is this for?
Often taken alongside or after CB1. Students interested in regulatory roles, pensions, or macroeconomic analysis benefit most. Students with economics A-level or BCom background find this paper more straightforward.
154 days until CB2, April 2027
CB2 16 Apr · entry closes in 84 days
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Learn CB2 free — 8 worked explainers
One idea per page, explained from scratch, each ending in a worked example with the arithmetic shown in full. These are the ideas students most often get stuck on in CB2. Start anywhere.
- Price elasticity of demand, and what it decides about a price rise Calculate price elasticity of demand by both the original-quantity and the average-quantity method, and use it to say whether a price rise will raise or lower revenue
- Income and substitution effects: splitting one price change in two Split the total effect of a price change into its substitution and income parts using the Slutsky method, and say which way each part points
- Profit maximisation and the shutdown decision, from one cost table Find the profit-maximising output from a cost table and decide, at any given price, whether the firm should produce, operate at a loss, or shut down
- Cournot and Bertrand: why the same two firms give two different answers Solve a Cournot duopoly from its reaction functions, compare the outcome with monopoly, Bertrand and perfect competition, and explain why a cartel is unstable
- Adverse selection and moral hazard, and what an insurer does about them Trace the unravelling of a pooled insurance market round by round, and show numerically why a deductible or a no-claims discount leaves both sides better off
- National income and the multiplier: where the rest of the spending comes from Trace a spending injection round by round, calculate the multiplier from the marginal propensities, and check that the leakages add back to the injection
- The IS-LM model and crowding out, solved with numbers Derive IS and LM curves from given equations, solve for output and the interest rate, and measure how much of a fiscal expansion is crowded out
- How monetary policy reaches the economy: the transmission mechanism Trace a policy rate change through each transmission channel to spending, and quantify its effect on a borrower, a firm's investment and a bond price
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Complete Syllabus
- Consumer theory: utility maximisation, indifference curves, Slutsky equation, demand curves
- Firm theory: production functions, cost curves, profit maximisation, shutdown decision
- Market structures: perfect competition, monopoly, oligopoly, Bertrand and Cournot models
- Market failure: externalities, public goods, information asymmetry, adverse selection, moral hazard
- Insurance economics: regulation justification, adverse selection in health markets, no-claims discounts
- National income accounting: GDP, GNP, consumption function, multiplier effects
- Keynesian macroeconomics: IS-LM model, aggregate demand and supply, output gaps
- Monetary policy: central bank tools, interest rate transmission mechanism, QE
- Fiscal policy: government spending, automatic stabilisers, Ricardian equivalence
- International economics: exchange rate regimes, purchasing power parity, balance of payments
Career Outcomes
Regulatory Actuary, Pensions Consultant (economics component), Chief Actuary (long-term)
₹4–7 LPA with CB2 cleared alongside CM papers
The information asymmetry and market failure sections overlap heavily with real insurance problems. Understanding adverse selection in theory makes the insurance application questions much easier.
“I was surprised how much CB2 content came up in my interviews. Questions about moral hazard in health insurance, regulatory capital, all from this paper. S.MONK made economics interesting for the first time.”