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CHANGE IN BUSINESS INVENTORIES: The increase or decrease in the stocks of final goods, intermediate goods, raw materials, and other inputs that businesses keep on hand to use in production. This is one of two main categories of gross private domestic investment included in the National Income and Product Accounts maintained by the Bureau of Economic Analysis. The other category is fixed investment. Change in business inventories is NOT what most people think of when the topic of business investment arises. Inventory changes are considered investment because firms need inventories to smooth the flow of production and sales just like they need factories and equipment to produce goods. In fact, inventories are frequently termed "working capital."
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SHORT-RUN PRODUCTION ALTERNATIVES A firm faces three production options in the short run based on a comparison between price, average total cost, and average variable cost. If price is greater than average total cost, a firm earns an economic profit by producing the quantity that equates marginal revenue with marginal cost. If price is less than average total cost but greater than average variable cost, a firm incurs an economic loss, but produces the quantity that equates marginal revenue with marginal cost. If price is less than average variable cost, a firm shuts down production in the short run, incurring an economic loss equal to total fixed cost.
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PURPLE SMARPHIN
[What's This?]
Today, you are likely to spend a great deal of time surfing the Internet wanting to buy either a weathervane with a horse on top or a case of blank recordable DVDs. Be on the lookout for slightly overweight pizza delivery guys.
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The earliest known use of paper currency was about 1270 in China during the rule of Kubla Khan.
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"Progress begins with the belief that what is necessary is possible. " -- Norman Cousins, editor, writer
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LIFO
Last In First Out
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