The Fixed-Period Inventory Model Can Have a Stockout During the Review

question 72

True/False

The fixed-period inventory model can have a stockout during the review period as well as during the lead time, which is why fixed-period systems require more safety stock than fixed-quantity systems.

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Definitions:

Demand

The quantity of a product or service that consumers are willing and able to purchase at various prices over a given period of time.

Allocative Efficiency

A state of the economy in which production represents consumer preferences; every good or service is produced up to the point where the last unit provides a marginal benefit equal to its marginal cost of production.

Productive Efficiency

A situation in which an economy or entity can no longer produce additional amounts of a good without lowering the production level of another product.

Substitute Goods

Products or services that can be used in place of each other, having a positive cross-elasticity of demand.