is there an actual formula companies use to calculate what the perfect price of an object should be?
In: Economics
Typical retail mark-up is 100%, so a t-shirt that costs a store $10 gets marked $20. That additional $10 covers the store’s rent, utilities, employees, marketing, and allows for discounts/sales.
For many businesses, a 10% margin is target, so in the above example the store would hope to hold all those other expenses to $9.
Same 10% profits holds for other businesses, too, so say you’re a plumber you’d hope to have at least 10% profits after paying your employees, paying for parts and materials, paying for your company’s tools and trucks, marketing, etc. If there’s more demand than you can meet, you could raise prices to make same amount of money with less work, if you didn’t have enough work for a time you might offer discounts.
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