Question

“It is better to pay regular price than to stand in a long line for a free item.” Discuss the statement using three (3) core principles of economics (with applicable examples) to support your views.

Answer 1

Value of any product is the benefits derived from it and the cost incurred in order to procure the same. Benefit can be explained as the technical benefit or the usage of the product. Cost incurred is the monetary, energy and psychic cost incurred in order to procure the same.

"It is better to pay regular price than to stand in a long line for a free item.” This is because the monetary cost incurred is quite low in procuring the same but the energy and psychic cost standing in a long queue is quite high and thus the value of the product comes down.

Opportunity cost is the benefit foregone by not choosing the second best alternative. The opportunity cost of getting the free item is relaxation and a stress free time. Thus the opportunity cost is quite high and as a result person chooses to skip the free item.

Every human being faces scarcity of time as time being a limited resource. Within the limited time which can be spent either in standing in a long queue and get stressed or buying the product at regular price. Thus he chooses the option based on his priority. A price sensitive customer chooses free item and a time sensitive customer chooses paying the regular price.