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Definition of 'Markup'

Markup is the difference between the cost of a product and its selling price. It is a percentage of the cost that is added to the price to cover the seller's expenses and make a profit.

Markup can be calculated as follows:

Markup = (Selling Price - Cost) / Cost

For example, if a product costs $10 to produce and is sold for $15, the markup is 50%.

Markup is used to cover a variety of costs, including:

* The cost of the product itself
* The cost of labor to produce the product
* The cost of marketing and advertising the product
* The cost of shipping and handling the product
* The cost of overhead, such as rent, utilities, and salaries
* The cost of profit

Markup can also be used to create a sense of urgency or scarcity, which can lead to increased sales. For example, a store may mark up a product by 50% and then offer it for a "sale" at 25% off. This creates the illusion that the product is a good deal, even though it is still being sold for more than it cost to produce.

Markup is an important concept for businesses to understand, as it can help them to set prices that are profitable and sustainable.

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