FOUNDATIONS OF MICROECONOMICS 2026
COMPREHENSIVE ASSESSMENT SCRIPT
SOLVED QUESTIONS ANSWERS UPDATED
REVIEW SET
◉ 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.
Answer: perfectly elastic, straight horizontal line, at that price,
customers would buy any about of goods, however is price is
increased at all then demand falls to zero,
◉ when elasticity is zero for supply.
Answer: perfectly inelastic,producers make this much regardless of
price,
, ◉ when elasticity is infinite for supply.
Answer: perfectly elastic,at this price, producers will supply any
amount
◉ unit elasticity.
Answer: where elasticity is -1, one unit of price increase cuases one
unit of quantity demanded decraese
◉ other elasticity values.
Answer: > -1 = inelastic as %q?>%p
< -1 = elastic as %q<%p
◉ income elasticity of demand.
Answer: %change in q/% change income
◉ cross elasticity of demand.
Answer: %change in q of good 1/% change in p of good 2
◉ exogenous variable.
Answer: variable that is cant be controlled so is just accepted
◉ competitive equilibrium.
COMPREHENSIVE ASSESSMENT SCRIPT
SOLVED QUESTIONS ANSWERS UPDATED
REVIEW SET
◉ 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.
Answer: perfectly elastic, straight horizontal line, at that price,
customers would buy any about of goods, however is price is
increased at all then demand falls to zero,
◉ when elasticity is zero for supply.
Answer: perfectly inelastic,producers make this much regardless of
price,
, ◉ when elasticity is infinite for supply.
Answer: perfectly elastic,at this price, producers will supply any
amount
◉ unit elasticity.
Answer: where elasticity is -1, one unit of price increase cuases one
unit of quantity demanded decraese
◉ other elasticity values.
Answer: > -1 = inelastic as %q?>%p
< -1 = elastic as %q<%p
◉ income elasticity of demand.
Answer: %change in q/% change income
◉ cross elasticity of demand.
Answer: %change in q of good 1/% change in p of good 2
◉ exogenous variable.
Answer: variable that is cant be controlled so is just accepted
◉ competitive equilibrium.
