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Consider a Periodic Review System with a Lead Time of Two

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Consider a periodic review system with a lead time of two weeks and a review period of seven weeks. If the average demand per week is 1000 units and 300 units of safety stock are held, what should the target inventory level be?


Definitions:

Long Run

The time period in which all factors of production can be varied, but technology remains constant.

Product Differentiation

A marketing strategy that businesses use to distinguish their product from similar offerings in the market, through variations in quality, features, style, or branding.

Monopolistically Competitive

A market structure where many firms sell products that are similar but not identical, allowing for product differentiation and some price control.

Elasticity

A measure of how much the quantity demanded or supplied of a good responds to a change in one of its determinants, such as price.

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