Answer to Question #58348 in Macroeconomics for Bawar

Question

Suppose a gasoline station offers the following promotion on the 4th of
July: "TODAY ONLY: FREE GASOLINE FROM NOON UNTIL 3:00 P.M.!
APPY BIRT DAY, AMERICA!" Is that gasoline a free good to the
owner of the station? Is it a free good for all the drivers who wait in long
lines to fill up? Countless others might decide to avoid the "free" gas and
fill up at other stations that charge $4.00 per gallon. In your opinion, are
they foolish to pass up the opportunity? In the economic way of thinking,
would they be failing to economize?

Answer 1

That gasoline is not a free good to the owner of the station, because he bought it from the wholesaler and just resells it. It is also not a free good for all the drivers who wait in long lines to fill up, because they should spend time to receive free gas, and this proposition is available only on this gasoline station. Countless others might decide to avoid the "free" gas and fill up at other stations that charge $4.00 per gallon. This people are not foolish to pass up the opportunity, because the time spent in long lines has also some value to this people, that's why they are not failing to economize.