Cheaper Walmart Thanksgiving Meal

EconEye Admin

9 months ago

Walmart’s Thanksgiving meal contains 15 products, six fewer than 2024’s. Items like pecan pie and sweet potato are out, and quantities have decreased—for example, one can of cream of mushroom soup versus two last years. Walmart store brands replace a large proportion of name brands. The meal is 25% cheaper.—cnn.com

Answer the following questions to check your understanding of the story.

What is the bias in the CPI that the Walmart Thanksgiving measure avoids?

a) Commodity substitution bias

b) New goods bias

c) Quality change bias

d) Outlet substitution bias

Wrong! - Outlet substitution concerns switching store types, which doesn’t happen here, so it doesn’t apply. Quality changes can raise prices, but this scenario is about changing items, not quality differences. New goods bias applies when entirely new products appear in the basket; that’s not the case here.

Good Job! - Consumers switch to cheaper substitutes when prices rise, but the CPI’s fixed basket misses this. Walmart’s updated basket avoids the bias.

Which price index best measures changes in the U.S. cost of living?

a) The PCEPI

b) The CPI

c) The core CPI

d) The GDP deflator

Wrong! - The CPI uses a fixed basket and misses substitutions and the GDP deflator covers all goods produced in the economy, so they both don’t track cost-of-living changes well. Core CPI excludes food and energy—key household expenses—so it cannot reflect overall living costs.

Well Done! - The PCEPI updates consumer spending patterns continuously, so it best reflects true cost-of-living changes.

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