Glamor Economics

Chapter 2

Chapter 1 Warm-up Reading—The World of Economics You Haven't Experienced
Section 1 Economics in a Cup of Coffee
Why do restaurants offer free refills?This seemingly fool-like business model contains shrewd economic thinking.There is a saying in economics called "There is no free lunch in the world", and of course there will be no truly free refills.The so-called free is just a business strategy of the enterprise, behind it contains economic knowledge such as production cost, pricing, profit, and scale effect.

Let's take a look at a post posted by a netizen on Tianya, targeting McDonald's "free refill" service, thinking it is a blatant deception to consumers.The content of the post is as follows:
I am from Tianjin. I went near Binjiang Road because of my work. I bought a McDonald's set meal at two o'clock in the afternoon.After getting the package, I sat on the seat and opened the lid of the coffee cup and found that the coffee in the cup was much less than usual. Then I turned the cup and saw that the coffee in the cup was more than 1 centimeter away from the dividing line (the coffee is "please" word position)!Feeling really helpless.At this moment a waiter came and I told her about it and her answer was really infuriating!
She looked at the cup, and then said: "It is impossible to fill up the coffee for you, it is so easy to spill, don't you still need to put creamer and sugar? You can refill your cup of coffee for free, and you can drink it again." Refills. Ask for a refill now if you're feeling down!"

After listening, I didn't say anything, and I felt that there was no need to say anything!I put the creamer and sugar in the coffee and the coffee has risen by half a centimeter, still not at that limit!

I took a photo of the stuff with my phone before I left and the previous waiter probably saw it and came over and asked, "Do you need a refill?" I said no.

This netizen thinks that the coffee is not refilled is a kind of deception to himself. Like this netizen, many customers do not know that McDonald's coffee is free to refill.In McDonald's in other countries, Coke is also enough, and there is no distinction between large cups, medium cups and small cups.Also in many restaurants, drinks are also provided with free refills.

Many people will ask, how can a restaurant make money if refills are free?Merchants own the cleverness of their own merchants.

Most businesses sell a lot of goods.To stay in business, businesses don't have to charge more than they cost for each item.Instead, it only needs to make total revenue equal or exceed the total cost of goods sold.So, if entrees, desserts, and other items already include enough profit margins, restaurants can certainly offer free refills without losing money.

What if all restaurants don't offer free refills and one restaurant starts doing it on a whim?Diners who enjoy free refills at the restaurant will feel they have gotten a good deal.As word of mouth spreads, the restaurant will soon find itself with far more customers than before.Although the refill service will add some cost, this part of the cost is quite low.Since the restaurant's profit margin on the oversold meals will most likely exceed the cost it incurs for free refills, the restaurant's overall profit will increase.

So, when you drink free refills at a restaurant, you must not secretly thank yourself for taking advantage, because you have already paid for the free drink.If you can drink a few more glasses, the price you pay will be relatively cheap.

(End of this chapter)