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Essentials of Economics 2nd Edition by Campbell McConnell, Randy Grant, Stanley Brue
Edition 2ISBN: 978-0073511313Essentials of Economics 2nd Edition by Campbell McConnell, Randy Grant, Stanley Brue
Edition 2ISBN: 978-0073511313 Exercise 2
"Buy 2, get 1 free." Explain why the "1 free" is free to the buyer but not to society.
Explanation
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Resources at the disposal of society are limited and are used in varied proportions to manufacture various goods and services.
If production of one good is increased then reallocation of limited resources takes place and production of some other good decreases.
When a company offers one item free with purchase of two items, this free item may be free for consumer but production of this "free" item implies decreased production of some other good whose production may have increased if resources used in production of this "free" item is transferred towards it.
So, even though this item is free to the consumer but cost it is incurring on the society in terms of decreased production of some other goods make it a non-free item for the society as a whole.
If production of one good is increased then reallocation of limited resources takes place and production of some other good decreases.
When a company offers one item free with purchase of two items, this free item may be free for consumer but production of this "free" item implies decreased production of some other good whose production may have increased if resources used in production of this "free" item is transferred towards it.
So, even though this item is free to the consumer but cost it is incurring on the society in terms of decreased production of some other goods make it a non-free item for the society as a whole.
Essentials of Economics 2nd Edition by Campbell McConnell, Randy Grant, Stanley Brue
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