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

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. Markup can be expressed as the fixed amount or as a percentage of the total cost or selling price. 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.

Below shows markup as a percentage of the cost added to the cost to create a new total (i.e. cost plus).

A different method of calculating markup is based on percentage of selling price. This method eliminates the two-step process above and incorporates the ability of discount pricing.

Comparing the two methods for discounting:

These examples show the difference between adding a percentage of a number to a number and asking of what number is this number X% of. If the markup has to include more than just profit, such as overhead, it can be included as such:

or