The original gross margin is (2.50 / 1.00) - 1 = (2.5 - 1) = 1.5 = 150%
If you increase the sell price by the same percentage as the growth in cost,
you maintain the same percentage of gross margin.
If the cost increases $0.25, that's a percentage increase of (0.25 / 1.00) = 25% .
Increase the sell-price 25%: (1.25) x ($2.50) = $3.125 .
Then the gross margin is (3.125 / 1.25) - 1 = (2.5 - 1) = 1.5 = still 150%
Now, that's the math. But I claim that maintaining the constant percentage
of gross margin is a greedy, grasping, rapacious gouge of your customers.
Suppose that you operate a grocery store. At some time in the past, you
decided that if you marked up a basketful of groceries by $10, you could
realize enough profit to live comfortably, raise your children responsibly,
and provide for your old age. Now comes your wholesaler, and increases
all of his prices to you by 25%. By what logic are you justified in raising all
of your sell-prices to your customers by 25%, and suddenly taking home
$12.50 every time you sell a basketful, instead of the $10 that once satisfied
all of your needs ? A constant amount of gross margin is what you need.
A constant percentage of gross margin is unwarranted, undeserved, and greedy
