FOUNDATIONS OF MICROECONOMICS 2026
CERTIFICATION EVALUATION TEST PAPER
QUESTIONS SOLUTIONS GRADED A PLUS
◉ behavioural function.
Answer: a function where behaviour of agents is affected by external
factors
◉ behavioural function types.
Answer: demand,supply
◉ demand function.
Answer: studies how the demand for a product changes in response
to price, is always negative
◉ demand function movement.
Answer: move ALONG = changes in quantity demanded due to price
change, entire curve SHIFT UP/DOWN = entire market demand
increases/decraeses
◉ supply function.
,Answer: studies how the quantity supplied by a firm changes in
response to market price,is always positive
◉ supply function movement.
Answer: movement ALONG = changing quantity supplied based on
market price change,SHIFT UP/DOWN = entire supply has
increased/decraesed
◉ market supply and market demand.
Answer: the sum of the individual demand and supply functions
within a market
◉ demand and supply graph key.
Answer: PRICE is y and QUANTITY is x
◉ inverse demand function.
Answer: shows highest price a consumer is willing to pay for that
quantity
◉ when to use the inverse demand and supply functions.
Answer: working out PS and CS
◉ marginal value.
, Answer: the price a customer is willing to pay for one extra unit of
the same good
◉ marginal cost.
Answer: the cost of producing one extra unit of the same good
◉ optimal production equation.
Answer: P = MC, this is where there is no profit to be made from a
sale so we stop production at this quantity,is used when MC is
increasing
◉ elasticity.
Answer: studies the degree of change in one variable in response to
the change of another
◉ price elasticity of demand formula.
Answer: % change of q/% change in p
◉ when elasticity is zero for demand.
Answer: perfectly inelastic, straight vertical line,for that quantity of
the good a customer will pay any price
◉ when elasticity is infinity (% change in p is zero) for demand.
CERTIFICATION EVALUATION TEST PAPER
QUESTIONS SOLUTIONS GRADED A PLUS
◉ behavioural function.
Answer: a function where behaviour of agents is affected by external
factors
◉ behavioural function types.
Answer: demand,supply
◉ demand function.
Answer: studies how the demand for a product changes in response
to price, is always negative
◉ demand function movement.
Answer: move ALONG = changes in quantity demanded due to price
change, entire curve SHIFT UP/DOWN = entire market demand
increases/decraeses
◉ supply function.
,Answer: studies how the quantity supplied by a firm changes in
response to market price,is always positive
◉ supply function movement.
Answer: movement ALONG = changing quantity supplied based on
market price change,SHIFT UP/DOWN = entire supply has
increased/decraesed
◉ market supply and market demand.
Answer: the sum of the individual demand and supply functions
within a market
◉ demand and supply graph key.
Answer: PRICE is y and QUANTITY is x
◉ inverse demand function.
Answer: shows highest price a consumer is willing to pay for that
quantity
◉ when to use the inverse demand and supply functions.
Answer: working out PS and CS
◉ marginal value.
, Answer: the price a customer is willing to pay for one extra unit of
the same good
◉ marginal cost.
Answer: the cost of producing one extra unit of the same good
◉ optimal production equation.
Answer: P = MC, this is where there is no profit to be made from a
sale so we stop production at this quantity,is used when MC is
increasing
◉ elasticity.
Answer: studies the degree of change in one variable in response to
the change of another
◉ price elasticity of demand formula.
Answer: % change of q/% change in p
◉ when elasticity is zero for demand.
Answer: perfectly inelastic, straight vertical line,for that quantity of
the good a customer will pay any price
◉ when elasticity is infinity (% change in p is zero) for demand.
