Measure a firm’s market power as the markup of price over marginal cost.
Please do not make financial decisions based on these results.
What is the Lerner Index Calculator?
Measure a firm’s market power as the markup of price over marginal cost. To use the Lerner Index Calculator, enter price, marginal cost; it returns lerner index, markup over marginal cost, implied price elasticity of demand, and shows them instantly as you type.
Where the Lerner Index Calculator fits
Measure a firm’s market power as the markup of price over marginal cost. The main figure it returns is the Lerner index, worked out from the values you enter.
It belongs with the other business planning tools. If you are comparing options or checking a result from another angle, try the HHI Calculator (Herfindahl-Hirschman Index Calculator), Direct Material Price Variance Calculator or the Profitability Index Calculator.
How to use the Lerner Index Calculator
- Enter your numbers. The inputs are Price ($), Marginal cost ($). Use figures from the same period (same month, quarter or year) for every field. Fields marked optional can stay at zero.
- Read the result. The highlighted box gives the Lerner index, and the cards below show Markup over marginal cost, Implied price elasticity of demand. Tables and charts break it down further.
- Test other scenarios. Results update as you type. Change one value at a time to see what drives the answer, and press Reset to go back to the defaults.
Formula and how it works
Example with real numbers
Here is the Lerner Index Calculator using the default values shown in the calculator above:
Inputs
| Price ($) | 50 |
|---|---|
| Marginal cost ($) | 35 |
Results
| Lerner index | 0.3 |
|---|---|
| Markup over marginal cost | 42.86% |
| Implied price elasticity of demand | -3.33 |
With these inputs the calculator returns Lerner index: 0.3. Change any value in the calculator to see how the result moves.
What if you change one input?
Sensitivity check: raising Price ($) from 50 to 60 (about 20% higher) and leaving everything else as in the example above changes the results like this:
| Result | Example | After the change | Change |
|---|---|---|---|
| Lerner index | 0.3 | 0.417 | +38.9% |
| Markup over marginal cost | 42.86% | 71.43% | +66.7% |
| Implied price elasticity of demand | -3.33 | -2.4 | +28% |
The input that moves the result most is the one to check twice. Change it in the calculator above to test your own case.
What the results tell you
The results panel of the Lerner Index Calculator reports Lerner index, markup over marginal cost and implied price elasticity of demand. Compare these figures while changing one input at a time, and use the related calculators below to look at the same situation from another angle.
Method and limits. This calculator applies the formula in the section above to your inputs, in your browser; nothing you enter is stored on our servers. The result is only as accurate as the numbers you enter and the formula shown above. It is for information, not financial, tax or legal advice.
Frequently asked questions
What does a Lerner index of zero mean?
Price equals marginal cost, which is perfect competition; higher values signal more market power.
Are the results forecasts?
No. They apply the formula shown to the numbers you enter, so the output is only as realistic as your assumptions.
What is the most important number for a new business?
Cash runway. A profitable plan still fails if cash runs out first, so check burn rate and break-even together.
Are the results guaranteed?
No. Results depend entirely on the numbers you enter and the formulas shown on this page. Please do not make financial decisions based on them alone; confirm important figures with a licensed professional.
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