# Optimal Price Calculator

URL: https://speedycalculator.com/calculators/finance/optimal-price/
Last updated: 2026-10-25

> The optimal price calculator works out the profit-maximising price from the price elasticity of demand (estimated from two price/quantity points) and your marginal cost – using the markup rule P = MC × e ÷ (1 + e).

## Inputs

- Marginal cost per unit
- Initial price
- Initial quantity sold
- New price
- New quantity sold

## Results

- Price elasticity of demand
- Optimal price
- Optimal markup over marginal cost
- Profit at initial price
- Profit at new price
- Note

## Formula

```
Elasticity e = % change in quantity ÷ % change in price (midpoint method)
Optimal price = MC × e ÷ (1 + e) (only when demand is elastic, e < −1)
Equivalent markup over cost = −1 ÷ (1 + e)
```

## Explanation

The more price-sensitive your customers (the more negative the elasticity), the lower the optimal markup. If demand is inelastic (−1 < e < 0), raising the price increases profit until demand becomes elastic.

### How to use the Optimal Price Calculator

- **Marginal cost per unit**
- **Initial price**
- **Initial quantity sold**
- **New price**
- **New quantity sold**

Results update as you type, and every field accepts the units shown in its menu.

### How it works

Enter your marginal cost and two observed price/quantity points.

### Tips

- Use consistent periods (a year or a quarter) for flow figures and period-end values for balances.
- Average opening and closing balances when a ratio mixes a flow with a stock.
- Benchmark against competitors in the same industry.
- Read the ratio together with others – profitability, liquidity and efficiency tell different stories.

### Common mistakes to avoid

- Using sales instead of cost of goods sold for inventory ratios.
- Mixing gross, operating and net profit.
- Ignoring one-off items that distort a single year.

### Inputs explained

FieldWhat to enterMarginal cost per unitAmount in your currencyInitial priceAmount in your currencyInitial quantity soldA numberNew priceAmount in your currencyNew quantity soldA number

### What each result means

- **Price elasticity of demand** = (([New quantity sold] - [Initial quantity sold])÷(([New quantity sold] + [Initial quantity sold])÷2))÷(([New price] - [Initial price])÷(([New price] + [Initial price])÷2))
- **Profit at initial price** = ([Initial price] - [Marginal cost per unit])×[Initial quantity sold]
- **Profit at new price** = ([New price] - [Marginal cost per unit])×[New quantity sold]

### Example values

How the main result changes when **Marginal cost per unit** changes and everything else stays at the example values above:

Marginal cost per unitOptimal price614.54921.811229.081536.351843.622458.15

## Worked example

Inputs — Marginal cost per unit: $12; Initial price: $20; Initial quantity sold: 1,000; New price: $22; New quantity sold: 850.

Results — Price elasticity of demand = -1.703; **Optimal price = $29.08**; Optimal markup over marginal cost = 142.31 %; Profit at initial price = $8,000.00; Profit at new price = $8,500.00; Note = Demand is elastic – the optimal price is shown.

## FAQ

**How is the optimal price calculated?**
Using the inverse elasticity rule: P = MC × e ÷ (1 + e).

**Why must demand be elastic?**
With inelastic demand, raising the price always increases profit.

**How accurate is this?**
It assumes constant elasticity; test prices in practice.

**What formula does the Optimal Price Calculator use?**
Elasticity e = % change in quantity ÷ % change in price (midpoint method).


## Sources

- [Corporate Finance Institute – financial ratios](https://corporatefinanceinstitute.com/)