Business Tools
Use this Lerner Index calculator to screen SKU pricing power before reviewing elasticity, competitor pricing, contracts, or price-change scenarios.
Live calculator
$10.00 markup divided by $40.00 price.
25.0% price-cost margin before demand-risk adjustment.
15% demand-risk haircut applied to the raw index.
Keep price and marginal cost on the same unit, currency, time window, and product mix before comparing pricing power across SKUs.
| Measure | Value |
|---|---|
| Price | $40.00 |
| Marginal cost | $30.00 |
| Markup amount | $10.00 |
| Markup on cost | 33.3% |
| Target index | 0.25 |
| Gap vs target | 0 |
Lerner Index is a directional pricing-power screen, not a demand model. Pair it with elasticity, competitor pricing, contract constraints, and customer-impact review before changing prices.
Use this for planning and comparison. Contracts, collections, payables, tax timing, payroll, refunds, one-time bills, seasonality, and accounting treatment can change the real business result.
Quick answer
Lerner Index Calculator calculates lerner Index and pricing power from price per unit, marginal cost, target index and demand risk. The visible formula is Lerner Index = (price - marginal cost) / price.
Formula
Lerner Index = (price - marginal cost) / priceUse the same unit, currency, product mix, and time window for price and marginal cost before comparing results.
How to use
Example
Calculator use
Before relying on it
Details
These notes make the assumptions explicit, especially where the same search query can mean slightly different things.
Higher values imply more room between price and marginal cost, but do not prove demand can absorb a price increase.
Using average cost, fully loaded cost, or an incomplete variable-cost estimate can change the interpretation.
Pair with elasticity, competitor pricing, customer impact, and contract limits before setting price.
Benchmarks
The calculator is a decision aid, not a fixed rule. Use the output to compare scenarios and document your assumptions. Benchmark ranges are broad planning heuristics unless this page names a specific source for the range.
Little price-cost room; validate cost accuracy before drawing conclusions.
Meaningful markup signal, but still dependent on demand and competitive context.
Potential pricing-power signal that should be reviewed against elasticity and market constraints.
Calculator accuracy
The formula, inputs, example, and limitations are shown so the result is checkable, not just a number in a box.
Lerner Index = (price - marginal cost) / price
Price per unit, Marginal cost, Target index, Demand risk
Business results depend on contracts, accounting treatment, taxes, payment timing, refunds, collections, and operating assumptions.
June 6, 2026
Toolkit Shelf. Lerner Index Calculator. Last reviewed June 6, 2026. https://toolkitshelf.com/tools/lerner-index-calculator
FAQ
It uses the same price denominator as gross margin, but the cost input should be marginal cost rather than accounting cost or fully loaded cost.
No. It screens price-cost room. Use elasticity, competitor behavior, customer impact, and contract limits before deciding on a price change.
The index becomes negative, which signals the product is priced below marginal cost under the current assumptions and needs review.
No. Business tools are scenario planners. Contracts, taxes, payment timing, accounting treatment, refunds, and legal requirements can change decisions.
Save the assumptions, compare a conservative scenario, and review the result with actual books, contracts, or an advisor before making a high-stakes decision.
Different tools may use different rounding, assumptions, default rates, methods, formulas, or input timing. Compare the visible method and inputs before relying on the output.