GCSE Economics Revision: Types of costs (fixed, variable, total) (With Mock Questions!)

Hello, amazing students! 👋

We’re going to tackle an important part of your GCSE Economics revision today: Types of Costs—specifically fixed, variable, and total costs. It’s a super important topic that can feel tricky at first, but with a little practice, you’ll have it down in no time! Ready? Let’s jump in!

What Are Fixed, Variable, and Total Costs?

Understanding these costs is crucial for knowing how businesses operate.

• Fixed costs don’t change no matter how much a business produces (think rent or salaries).
• Variable costs change with production levels (materials, utilities, etc.).
• Total costs are simply the sum of fixed and variable costs.

Once you’ve nailed these, you’ll have a solid foundation for understanding how businesses make decisions about pricing and production.

Key Learning Items

• Fixed Costs stay the same, no matter how many goods or services a business produces.

• Variable Costs increase or decrease depending on the level of production.

• Total Costs are the combination of fixed and variable costs. It’s basically everything a business spends on running its operations.

What You Need to Demonstrate in Your Exam

At GCSE level, you need to be able to:

• Define and distinguish between fixed, variable, and total costs.

• Explain how costs affect business decisions.

• Calculate total costs given fixed and variable costs (there may be simple maths involved, so practice a few examples!).

Remember, understanding these definitions and being able to use them in real-life scenarios (like in mock questions) will set you up for success!

Key Things to Remember Before the Exam

🤓 Know your definitions! Make sure you can explain each type of cost clearly.
🤓 Practice calculating! You might be asked to work out total costs, so get comfortable with the maths.
🤓 Real-world examples! Think about businesses you know and how their costs might fit into these categories.

Mock Questions (Let's Test Your Knowledge!)

Q1 - What is an example of a fixed cost?

a) Raw materials
b) Wages for factory workers
c) Monthly rent
d) Electricity bills

Q2 - Which of the following best describes a variable cost?

a) The cost of rent for the office
b) The cost of raw materials used in production
c) The cost of the CEO's salary
d) Insurance for the company’s assets

Q3 - If fixed costs are £1,000 and variable costs are £2 per unit, what would the total cost be for producing 500 units?

a) £2,000
b) £1,500
c) £2,500
d) £2,100

Q4 - Which of the following is true about total costs?

a) Total costs include both fixed and variable costs.
b) Total costs only include fixed costs.
c) Total costs are the same as profit.
d) Total costs decrease as production increases.

Q5 - A business has fixed costs of £5,000 and variable costs of £3 per unit. If the business produces 2,000 units, what are the total costs?

a) £11,000
b) £6,000
c) £15,000
d) £10,000

To check your answers and see more questions check out our GCSE Economics Multiple-Choice booklet, with 250 sample questions and answers for you to revise

That’s it for today’s revision on types of costs! Keep practicing these questions and reviewing the key concepts. You’re doing great, and with a little more revision, you’ll be all set to ace your exam! 🎉

Good luck, and remember—you’ve got this!