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Optimal Price Calculator

What is Optimal Price?

An optimal price is the maximum price a business can charge for a good to maximize revenue. In other words, it is the best balance between price and demand.

Formula

The formula to calculate the Optimal Price (OP) is:

$OP = MC \cdot \left( \frac{PD}{PD + 1} \right)$

Where:

$MC$ is the marginal cost.
$PD$ is the price elasticity of demand.

Example

Let's say the marginal cost (MC) is 50 and the price elasticity of demand (PD) is 2. Using the formula:

$OP = MC \cdot \left( \frac{PD}{PD + 1} \right) = 50 \cdot \left( \frac{2}{2 + 1} \right) = 50 \cdot \left( \frac{2}{3} \right) \approx 33.33$

So, the Optimal Price (OP) is approximately 33.33.