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Derivation of the markup rule. Mathematically, the markup rule can be derived for a firm with price-setting power by maximizing the following expression for profit: where. Q = quantity sold, P (Q) = inverse demand function, and thereby the price at which Q can be sold given the existing demand. C (Q) = total cost of producing Q.
Markup (business) Markup (or price spread) is the difference between the selling price of a good or service and its cost. It is often expressed as a percentage over the cost. A markup is added into the total cost incurred by the producer of a good or service in order to cover the costs of doing business and create a profit. The total cost ...
The Lerner index is defined by: where P is the market price set by the firm and MC is the firm's marginal cost. The index ranges from 0 to 1. A perfectly competitive firm charges P = MC, L = 0; such a firm has no market power. An oligopolist or monopolist charges P > MC, so its index is L > 0, but the extent of its markup depends on the elasticity (the price-sensitivity) of demand and ...
Mathematical markup language. A mathematical markup language is a computer notation for representing mathematical formulae, based on mathematical notation. Specialized markup languages are necessary because computers normally deal with linear text and more limited character sets (although increasing support for Unicode is obsoleting very simple ...
Markup is the difference between price and marginal cost. The formula states that markup as a percentage of price equals the negative (and hence the absolute value) of the inverse of the elasticity of demand. [33]
Profit margin is calculated with selling price (or revenue) taken as base times 100. It is the percentage of selling price that is turned into profit, whereas "profit percentage" or "markup" is the percentage of cost price that one gets as profit on top of cost price. While selling something one should know what percentage of profit one will get on a particular investment, so companies ...
Cost-plus pricing is a pricing strategy by which the selling price of a product is determined by adding a specific fixed percentage (a "markup") to the product's unit cost. Essentially, the markup percentage is a method of generating a particular desired rate of return. [1][2] An alternative pricing method is value-based pricing. [3] Cost-plus pricing has often been used for government ...
Markup rule in economics, a formula for the ratio of a monopolist's chosen price to its marginal cost. Markup (business) a term in retail business describing the increase in the price of goods to cover expenses and create a profit margin. Markup (legislation), the process to amend bills. The Markup, American nonprofit organization publishing ...