Microeconomics
Lerner Index Calculator
Measure price-cost markup and implied market power using price and marginal cost.
Inputs and results stay in this browser. Currency symbols are illustrative; use any consistent currency.
Understand Lerner index
One idea, three depths
Choose how deeply to explain Lerner index
Lerner index: Measure price-cost markup and implied market power using price and marginal cost.
Age 5Explain it to a 5-year-oldStart with a picture
Imagine using Lerner index to answer this question: measure price-cost markup and implied market power using price and marginal cost? Enter Price and Marginal cost; the calculator shows Lerner index. For example: A $60 price and $20 marginal cost produce a Lerner index of 0.667 and an implied demand-elasticity magnitude of 1.5 at a monopoly optimum. The answer tells you Lerner index.
Age 15Explain it to a 15-year-oldConnect it to the formula
The index ranges from zero under price-equals-marginal-cost pricing toward one as the proportional markup rises. Cost measurement and market definition strongly affect interpretation. The rule is Lerner index L = (Price − Marginal cost) ÷ Price; under monopoly optimum L = −1/Ed. Its input values are Price, Marginal cost, and the main result is Lerner index. For example: A $60 price and $20 marginal cost produce a Lerner index of 0.667 and an implied demand-elasticity magnitude of 1.5 at a monopoly optimum.
CollegeExplain it at college levelState the model precisely
This calculator evaluates a microeconomics relationship while holding unmodelled conditions constant. The implemented relation is Lerner index L = (Price − Marginal cost) ÷ Price; under monopoly optimum L = −1/Ed, evaluated from Price, Marginal cost to produce Lerner index. The index ranges from zero under price-equals-marginal-cost pricing toward one as the proportional markup rises. Cost measurement and market definition strongly affect interpretation. The result depends on comparable definitions, units, populations and time periods. It estimates a relationship; it does not establish causation or replace current primary data.
The economic question
Measure price-cost markup and implied market power using price and marginal cost.
Why this relationship is useful
The index ranges from zero under price-equals-marginal-cost pricing toward one as the proportional markup rises. Cost measurement and market definition strongly affect interpretation.
Inputs that must be comparable
- Price (minimum 0).
- Marginal cost (minimum 0).
Use one market, firm, population and time period throughout; mixing definitions can make a correctly calculated number economically meaningless.
The model
Lerner index L = (Price − Marginal cost) ÷ Price; under monopoly optimum L = −1/Ed
From inputs to output
The calculator combines Price, Marginal cost and reportsLerner index together with Price-cost margin, Implied elasticity magnitude. Change one assumption at a time to identify what actually drives the estimate.
How to read Lerner index
Read the sign, magnitude, unit and period together. The result quantifies the relationship in “measure price-cost markup and implied market power using price and marginal cost”; it does not by itself prove that one input caused another.
A worked economic example
A $60 price and $20 marginal cost produce a Lerner index of 0.667 and an implied demand-elasticity magnitude of 1.5 at a monopoly optimum.
Where interpretation can fail
Do not use the result when the input definitions, units or formula assumptions do not match the real situation. This is an educational model, not financial, investment, tax or policy advice; verify material decisions against primary data and professional guidance.
Supporting sourcesAcademic referencesPrimary standards, textbooks and complete citations
Standards, reading and academic references
Use the calculator as the worked interaction, then consult the primary standards and academic textbooks listed below. MW SysArc links to the original sources; the explanation on this page is original and does not reproduce them.
Principles of Economics 3e
Read the free OpenStax economics textbookCite this book
- APA 7
- Greenlaw, S. A., Shapiro, D., & MacDonald, D. (2022). Principles of economics 3e. OpenStax. https://openstax.org/books/principles-economics-3e/pages/1-introduction
- MLA 9
- Greenlaw, Steven A., et al. Principles of Economics 3e. OpenStax, 2022, https://openstax.org/books/principles-economics-3e/pages/1-introduction.
- Chicago author-date
- Greenlaw, Steven A., David Shapiro, and Daniel MacDonald. 2022. Principles of Economics 3e. Houston, TX: OpenStax. https://openstax.org/books/principles-economics-3e/pages/1-introduction.
OpenStax entries are free to read online. Follow the licence shown on each linked source before redistributing or adapting its content.
Reuse the page responsiblyCite this pageAPA, MLA, Chicago, Harvard, BibTeX and RIS
These formats cite this calculator page itself. They are separate from the academic references above, which support the mathematical method and terminology.
APA 7
MW SysArc. (2026, July 21). Lerner Index Calculator. MW SysArc Tools. https://economics.mwsysarc.com/micro/lerner-index
MLA 9
MW SysArc. “Lerner Index Calculator.” MW SysArc Tools, 21 July 2026, https://economics.mwsysarc.com/micro/lerner-index. Accessed 31 Aug. 2026.
Chicago 17
MW SysArc. “Lerner Index Calculator.” MW SysArc Tools. Published July 21, 2026. Accessed August 31, 2026. https://economics.mwsysarc.com/micro/lerner-index.
Harvard
MW SysArc (2026) ‘Lerner Index Calculator’, MW SysArc Tools. Published 21 July 2026. Available at: https://economics.mwsysarc.com/micro/lerner-index (Accessed: 31 August 2026).
BibTeX and RIS records
BibTeX
@misc{mwsysarc_lerner_index_2026,
author = {{MW SysArc}},
title = {Lerner Index Calculator},
howpublished = {MW SysArc Tools},
year = {2026},
url = {https://economics.mwsysarc.com/micro/lerner-index},
note = {Published July 21, 2026; accessed August 31, 2026}
}RIS
TY - ELEC
AU - MW SysArc
TI - Lerner Index Calculator
T2 - MW SysArc Tools
PY - 2026
DA - 2026-07-21
Y2 - 2026-08-31
UR - https://economics.mwsysarc.com/micro/lerner-index
N1 - Published July 21, 2026
ER -Clear answers
Frequently asked questions
What does the Lerner index do?
Measure price-cost markup and implied market power using price and marginal cost.
How does the Lerner index work?
The calculator applies this formula: Lerner index L = (Price − Marginal cost) ÷ Price; under monopoly optimum L = −1/Ed. The index ranges from zero under price-equals-marginal-cost pricing toward one as the proportional markup rises. Cost measurement and market definition strongly affect interpretation.
What can I learn from the Lerner index?
It helps you explore the relationship described by this tool: Measure price-cost markup and implied market power using price and marginal cost. Change one input at a time to observe how it affects the result.
Does MW SysArc receive or store what I enter?
No. The calculation runs locally in your browser. MW SysArc does not receive or store your calculation inputs.
How should I use the result?
Use the result as an estimate or educational aid. Check important financial, business or policy decisions with qualified sources and current data.
Last reviewed . Calculations tested .