Mark-Up Pricing

Discipline: Economics

Mark-up Pricing, also referred to as cost-plus pricing, is a concept developed by Polish economist Michal Kalecki (1899-1970).

Mark-up Pricing is considered an alternative to marginal cost pricing, and holds that firms simply add a mark-up (or profit) to the costs of their products to determine the selling price. Mark-up pricing is, in fact, an aspect of average cost pricing according to which firms first calculate the average cost of a product and then add on a mark-up, or profit.

Mark-up pricing fails to take into consideration purchasing desire, purchasing power, and competition; and it has been cited as a cause of cost-push inflation.

Also see: administered pricing, average cost pricing, marginal cost pricing, rate of return pricing, target return pricing

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