Key Idea: In 3.3, IB tests whether you understand costs, revenue and profit, and how they link together.
📊 Types of costs: **Fixed costs —** do not change with output. **Variable costs —** change with output. **Semi-variable costs —** partly fixed, partly variable. **Direct costs —** linked directly to production. **Indirect costs —** not directly linked.
💰 Revenue: **Revenue —** income from sales. **Higher price —** may increase revenue. **Higher demand —** increases revenue. **Lower demand —** reduces revenue.
Profit depends on both costs and revenue.
Important: Higher price does not always mean higher profit — demand matters.
- Use correct formula
- Show working
- Explain effect on profit
- Apply to the business