Free Lunch

Posted in Finance, Accounting and Economics Terms, Total Reads: 359

Definition: Free Lunch

Free Lunch refers to a situation in which goods or services are received at no cost, but the cost of the good or service is borne conclusively by some party or the other.

Free lunch was a common tradition in the US bars: providing free lunch to customers who ordered at least one drink. The meals offered were high on salt, ended up ordering more beer, which increased the revenue of the bars.In modern times, free lunch refers to anything that is purportedly received without any cost.

It has become more synonymous with the phrase “There is no such thing as a free lunch”. In financial terms, it means that the investors cannot earn unlimited profits on their investments as there is always an underlying risk of potential loss associated with the invested instruments. In economics, it is called the opportunity cost; the cost bore to lose one opportunity while choosing the other one. In a gist, it refers to the fact that nothing is free of cost in the world, everything has a price tagged to it.



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