I carry 5 bottles of water to work every day. I buy them in cases, where the unit price is 25¢ instead of the $1 I’d pay in my building’s convenience store. Five bottles is just right. It’s perfect planning every day.
I commute to into DC with my brother because we live close together. Some days he forgets to bring his yogurt-drink thingy or juice or whatever it is he brings in those strange bottles. On those days, he asks to borrow a bottle of water. I instead sell him one because I’ll drink 5 bottles during the day. If I let him buy one, I have to replace it at some point during the day. My cost to replace it is not the 25¢ I paid at Target, but the $1 I must pay at work. I charge him $1.
Am I gouging him, as he’s jokingly contended in the past? What happens to that answer if I add this new condition I learned yesterday: I sold him a bottle of water for $1, when my original cost for that bottle was 25¢. Having only four bottles during the day, I purchased a new bottle late yesterday afternoon. The price is now $1.15. I lost 15¢ in the deal. How long would I go on with that deal before I must stop selling to him altogether? Am I guilty of price gouging if I now charge him $1.15 when he forgets to bring a beverage to work? How is this scenario different from our most recent alleged example of price-gouging, gasoline?
I must charge my replacement cost, not what my current inventory cost me. That is economics, not price-gouging.