I just watched the "Crack The Case" tutorial on preplounge. Regarding profitability cases, they argue that "when profits go down, you either have a decline in revenue, raising costs or both" - From my point of view, this is incomplete...
In the case of discounts, costs can go up (variable/q and fixed stay the same, just "q" increases), revenues go up, and profits can still go down.
year 1: price = $4, costs = $2/q (assuming only variable costs), q ("quantity") = 4K
-> Revenues= $16K, costs= $8K, profit= $8K
year 2: price = $3 (on average a discount of 25%), costs stay the same (i.e. $2/q), q = 6K
-> Revenues= $18K, costs = $12K, profit = $6K
Conclusion: When profits go down, you can have an increase in revenue...
Please correct me if I'm wrong. Highly appreciate any comment.