Optimal Price Calculator
Investing & MarketsCalculate the profit-maximizing price for a product using its marginal cost and price elasticity of demand.
Optimal Price
The profit-maximizing price given your marginal cost and demand elasticity.
Markup Over Marginal Cost
66.67%
Estimated Profit
$6,666.67
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Odeh Ahwal0people find this calculator helpful
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Creators
Odeh Ahwal0people find this calculator helpful
Views
Helpful
Saved
Embeds
Investing & Markets calculators
Frequently Asked Questions
How is the optimal price calculated?
Optimal Price = Marginal Cost x (Elasticity / (Elasticity + 1)). This formula, from the Lerner Index / markup rule, is only valid for elastic demand (elasticity below -1); it maximizes profit given how sensitive customers are to price changes.
Why must elasticity be entered as a negative number below -1?
Price elasticity of demand is conventionally negative because demand falls as price rises. This formula also only produces a meaningful, above-cost price when demand is elastic (elasticity less than -1); inelastic demand (between -1 and 0) has no profit-maximizing finite price under this model.
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