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The economics of slushies

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David Campbell / PRNewsFoto / Jamba Juice / File

(Read caption) Fruit and vegetable smoothies from Jamba Juice are shown in this photo. Why do people pay $3 for a cup of ice?

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"That's quite a markup," remarked my father as he paid for my six-year-old son's treat after a soccer game. "Three dollars for a cup of ice."

It's true; the price tag did seem steep at first. But as we analyzed the situation more carefully — my father is also a fan of free markets — we realized that there was no reason to be outraged at the vendor's price.

The Context

Before speculating on the ins and outs of the frozen-drink market, let me give the background. My son plays soccer for a town league. Every Saturday, the teams all play each other at one central location, with at least 20 little fields set up for the various age brackets. During the course of the day, I'd guess that at least a thousand people (counting spectators) cycle through the fields.

During Easter weekend my parents were visiting, and we all went to my son's game. My son pointed out with enthusiasm a truck that was parked in a very accessible area, because it housed ice drinks. (I think technically they were not the ICEE brand, but it was the same idea.)

After my son's team absolutely blew out their opponents, I suggested to my son that if he asked nicely, Grandpa would probably buy him a treat at the truck. And now I have brought all readers up to speed from where our story first began. …

How Could Somebody Charge $3 for a Cup of Ice?

As a card-carrying armchair economist, I did not conduct any actual research for this article. Nevertheless, it may interest some readers to learn how to think like an economist on such everyday puzzles.

Factors on the Demand Side

The first important point is that my father voluntarily paid the $3 for the refreshment, albeit with some significant social pressure leaning on him after the promise made to my son. But if, for example, he had gotten to the truck and the sign said each frozen drink cost $30, my father clearly would have walked away. We could've told my son that it was too much money, and that we'd stop at a convenience store instead.

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