Result
Optimal price
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This calculation is for informational purposes only and does not replace advice from a qualified professional. Formulas and rates may not fit your exact situation — double-check the figures before making decisions.
How it is calculated
Optimal price = marginal cost × (elasticity ÷ (elasticity + 1)). This is the classic pricing rule (the Lerner index) for a seller with some market power: the less elastic demand is (the closer |elasticity| is to 1), the higher the optimal markup over cost, and vice versa.
The formula only works when the absolute value of elasticity is above 1 (elastic demand). At elasticity between −1 and 0 (inelastic demand), the formula produces a negative or meaningless price — that's not a calculation error but an economic fact: in that range there's no finite profit-maximizing price, because raising the price keeps paying off indefinitely — revenue grows faster than sales volume falls.
The calculation assumes elasticity stays constant over a wide price range — in practice that's a simplification: real elasticity usually changes with the price level itself, so treat the result as a benchmark rather than an exact optimal price.