A Local Lamp Store Expects to Sell 2000 Lamps in the Coming

question 31

Essay

A local lamp store expects to sell 2000 lamps in the coming year.It costs the store $1.00 in carrying costs for each lamp and $10.00 for each order placed.
a.What is the economic order quantity for the lamps?
b.How many orders will be placed each year?
c.If the store wants a one-week safety stock and it takes one week to receive an order after it has been placed,what should the inventory level be when a new order is placed? Assume a 50-week year.

---

Definitions:

External Costs

Costs incurred as a result of an economic activity that are not reflected in the market price, often shouldered by society or the environment.

Unemployment

A situation where individuals who are able and willing to work are not able to find employment.

Efficient Allocations

The optimal distribution of resources among competing uses to achieve the highest overall level of welfare or utility.

Market Failures

Situations where the allocation of goods and services by a free market is not efficient, often leading to a net social welfare loss.