What is Optimal Price?

The optimal price is that price point at which the total profit of the seller is maximized. When the price is too low, the seller is moving a large number of units but is not earning the highest possible aggregate profit. When the price is too high, the seller is moving too few units at a high margin per unit, and so achieves a lesser total profit figure. The optimal price is typically found through trial and error, to see which price point will result in the ideal unit quantity being sold.

A problem with the optimal price concept is that its sole focus is profit maximization. A company could instead lower its prices in order to gain market share, thereby driving competitors out of the market.