Main menu For students For teachers Explore our subjects Student events & courses

Explore

More for students
Sign in

Free Economics resources

Topics

Mark-up Pricing

Mark-up pricing (or cost-plus pricing) is a practical strategy where a business calculates the average total cost of producing a good and adds a percentage premium to determine the final selling price. Rather than using complex marginal equations, firms use mark-ups to secure profit margins based on their market power and consumer price elasticity.

For example, UK supermarkets apply razor-thin mark-ups of just 1% to 3% because competition is fierce and demand is highly elastic. Conversely, cinemas exploit localized monopolies over captive audiences to apply staggering 2,000% mark-ups on popcorn, knowing consumers have no alternative substitutes.

See also