Pricing, markups, discounts and comparing unit prices
7 min read · Updated 2026-10-12 · MoneyCalc
Three everyday calculations sit underneath almost every pricing decision, whether you run a business or simply want to know whether the larger pack is worth it. Markup and margin are not the same thing, a sale percentage is not the same as a percentage saving, and a shelf price is not the same as a price per unit.
Markup versus margin, and why the distinction matters
A markup is expressed against cost: a fifty per cent markup on something costing 100 gives a price of 150. A margin is expressed against the price: 50 out of 150 is a margin of thirty-three per cent. The same outcome, two different ways of describing it.
The practical consequence is arithmetic error. To achieve a forty per cent margin you need a markup of about sixty-seven per cent, because the margin is calculated on a larger base. Pricing businesses that confuse the two systematically underprice.
Discounts, and how a sale is really calculated
Twenty per cent off a hundred pounds leaves eighty — a twenty per cent saving. The same twenty per cent discount on a stacked sequence does not compound the way people expect, and a fifty per cent discount followed by a fifty per cent discount leaves a quarter of the original price, not a quarter off.
There is also the reverse problem: taking tax off a tax-inclusive price is not the same as adding it on. In the first case the tax is already inside the number and must be extracted; in the second it is added to a net price. The arithmetic is not symmetric, which is why shops and calculators handle them separately.
Unit price is the only fair product comparison
Two products on the same shelf can differ in price and quality, and the shelf price tells you nothing about which is cheaper per unit. Comparing the price per kilogram, per litre or per item removes the packaging from the comparison entirely.
Unit pricing is not automatically the cheapest option. A larger pack often has a lower unit price but a higher total, and if it will not be used before it goes off, the cheaper unit has bought waste. The correct question is cost per usable unit.
Percentages, and the direction of the question
A percentage calculation depends on which number is the base. Ten per cent of two hundred is twenty, but two hundred as a percentage of one thousand is twenty per cent, and ten per cent more than two hundred is two hundred and twenty. The same words describe four different operations.
Percentage increases and decreases are also asymmetric: a fifty per cent drop requires a hundred per cent increase to recover. This is why a large percentage loss is more damaging to a portfolio than the same gain in the opposite direction is helpful.
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Common questions
What is the difference between markup and margin?
Markup is calculated on cost; margin is calculated on the selling price. A 50 per cent markup on 100 gives a price of 150, which is a margin of about 33 per cent.
How do I work out the true cost per unit?
Divide the total price by the total quantity, then compare products by that figure. Remember to account for what will actually be used rather than what was bought.
Why does a 50 per cent loss need a 100 per cent gain to recover?
Because the gain is calculated on a smaller base. Losing half of 100 leaves 50, and a 100 per cent gain on 50 returns it to 100 — so a large fall is harder to recover from than an equivalent rise.
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