Markup represents the added amount between the cost of a good or service and its selling price. Businesses apply markup to the cost to generate profit. For example, if a product costs $50 to produce and it is sold for $75, the markup is $25 or 50% of the cost price. Markup percentage is often a key metric in pricing strategies, reflecting desired profitability along with competitive pricing considerations.

In practice, calculating markup involves determining an amount or percentage that will cover not only profit but also other costs such as overheads. Markup is common in retail, services, and manufacturing industries where the selling process involves a chain of cost additions. Measuring markup effectively aligns with achieving targeted profit margins and maintaining business financial goals.