Ch 2: The Operation of a Market

http://www.bloomberg.com/apps/news?pid=20601103&sid=azppdIrUGSi0

Summary: This article explains how Mexico's Wal-Mart, known as Walmex, is earning profit during the recession. The store is offering products and cheap prices. The world bank forecasts that this will increase poverty in Mexico by more than 4 million by the end of the year. In August, Mexico's unemployment rate increased to 6.3%. According to an equity strategist, Walmex is "capitalizing on people who want to trade down, people living day to day" which means that Walmex is earning a lot of profit on people who earn minimum wage and also depend on buying cheap quality goods. In Walmex's third fiscal quarter for the year increased profits by 20.5% and by 45.8% during the past 12 months.

Connection: Chapter 2 of the textbook talks about supply and demand factors and hints of these factors can be found in the article. Since Walmex is decreasing their prices they are increasing demand for their cheaper products, which will earn them more profit through a greater number of sales. More workers are being laid off because some other businesses can't afford to compete with Walmex so that's why unemployment rates surged during Walmex's prosperous fiscal period. Unfortunately for Walmex, since unemployment rates have increased, it means a lot of people have no income coming in. This causes the quantity demanded of Walmex's supplies to lower slightly. Income and price and the factors of demand involved in this situation.

Reflection: It's a tough decision to decide whether or not Walmex's way of operating is good for the market. Walmex is slowly lowering its competition because its taking advantage of the recession. I believe that Walmex is doing a great job being successful during the recession. If I were a resident in Mexico, the obvious choice of where I would want to get my groceries or daily necessities would definitely be Walmex. Unfortunately, there is a downfall to Walmex's success. I think if they continue their way of putting other businesses out of business, the unemployment rate would rise astronomically, resulting in less customers that can afford goods.