Home > Journalism and Economics, Microeconomics > Running Out of Money? Really?

Running Out of Money? Really?

An exercise for my microeconomics students: take this article and re-write it in terms of budget constraints, real income and indifference curves.

Then ask: don’t Wal-Mart shoppers always “run out” of money? If everything you could buy at Wal-Mart is “package X”, how would you graphically depict the change in price, income and substitution effects this article describes using everything else as Wal-Mart shoppers buy (hint: gasoline would be one item) as “package Y.”

Then graph what will happen if the CEO’s promise of lower prices is kept.

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