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When the Federal Republic of Germany (West Germany) absorbed the German Democratic Republic (East Germany) in 1990, residents of East Germany had accumulated large amounts of savings. Papers in the United States explored why East Germans saved so much. The indications were that time, rather than money, was the constraining factor in most consumption. Constant shortages and inefficiencies in providing goods forced the East Germans to wait in long lines in order to purchase most goods. Time spent waiting for meat was unavailable to use to wait for milk, bread or televisions. Draw 2 constraints on one indifference graph, one for money and one for time, with waiting in line the "price" of a good in terms of time. How does this show that residents of East Germany would save lots of their income?

Business Economics, Economics

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