Explore a price estimate using marginal cost and demand elasticity inferred from two observations.
Optimal Price Calculator
Results
Optimal price
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Optimal quantity
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Table of Contents
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What is Optimal Price?
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How to Use This Calculator
- Enter or select Marginal costs, Initial price, Initial quantity, Final price, Final quantity.
- Check the unit beside each measurement. For a percentage or rate, use the scale and time period stated in the form.
- Choose Calculate, then compare the output with the formula and example below. If you change a value or option, calculate again to update the result.
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Formula Used
Simple markup rule: price = marginal cost/(1+1/elasticity)
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Variables Explained
| Input | What it means |
|---|---|
| Marginal costs | Use the measured or stated value for this item, with the unit or category shown beside the field. |
| Initial price | The stated purchase or selling amount, in the same currency as the related costs. |
| Initial quantity | Number of identical pieces, units or sections to include. |
| Final price | The stated purchase or selling amount, in the same currency as the related costs. |
| Final quantity | Number of identical pieces, units or sections to include. |
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Worked Example
Marginal cost 10 and elasticity −2 imply a modeled price of 20.
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Why Use This Calculator?
Compare the result with the underlying statement, budget or proposed transaction. It is most useful when every amount uses the same reporting period and the same accounting definition.
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Common Mistakes
- The rule needs elastic demand and stable assumptions; two observations do not establish a reliable demand curve.
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Frequently Asked Questions
Should I use monthly or annual figures?
Use one consistent period for every amount and rate in the relationship. If a form specifies an annual rate or a monthly amount, follow that label rather than mixing time periods.
Does the result include fees and tax?
Only the costs and taxes represented by the inputs and formula are included. A real transaction can include other charges, so compare the estimate with the underlying agreement or statement.
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Sources & References
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