Markup (business)

Markup (or price spread) is the difference between the selling price of a good or service and its marginal cost.^[1] In economics, markups are the most direct way measure of market power: the extent to which a firm can influence the price at which it sells a product or service.^[1]

Markup 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 reflects the total amount of both fixed and variable expenses to produce and distribute a product.^[2] Markup can be expressed as the fixed amount or as a percentage of the total cost or selling price.^[3] Retail markup is commonly calculated as the difference between wholesale price and retail price, as a percentage of wholesale. Other methods are also used.

Markdowns refer to the ability of a firm to hold the price it pays for an input below the input's marginal product.^[1]

^ ^a ^b ^c Syverson, Chad (2025). "Markups and Markdowns". Annual Review of Economics. doi:10.1146/annurev-economics-081624-080143.
^ Pradhan, Swapna (2007). Retailing Management. Tata McGraw-Hill. ISBN 978-0-07-062020-9.
^ Ingels, Jack (2009). Ornamental Horticulture: Science, Operations, & Management. Cengage Learning. p. 601. ISBN 978-1-4354-9816-7.

[:0-1] Syverson, Chad (2025). "Markups and Markdowns". Annual Review of Economics. doi:10.1146/annurev-economics-081624-080143.

[Pradhan-2] Pradhan, Swapna (2007). Retailing Management. Tata McGraw-Hill. ISBN 978-0-07-062020-9.

[Ingels-3] Ingels, Jack (2009). Ornamental Horticulture: Science, Operations, & Management. Cengage Learning. p. 601. ISBN 978-1-4354-9816-7.

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