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Illustrate unplanned accumulation and decumulation of inventories with an example.

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In case of an unexpected fall in sales, the firm will have unsold stock of goods which is not anticipated. Hence there will be unplanned accumulation of inventories.

For example, suppose a firm starts the year with an inventory of 100 shirts and it expects to sell 1000 shirts for the coming year and it produces 1000 shirts and expecting to keep 100 as inventories.
However, during the year, the sales of shirt turned out to be unexpectedly low where the firm is able to sell only 600 shirts. This means that the firm is left with 400 unsold shirts. The firm ends the year with 400+100=500 shirts. The unexpected rise of inventories by 400 will be an example of unplanned accumulation of inventories.

In case of an unexpected rise in the sales there will be unplanned decumulation of inventories.
For example, if the sales are more than 1000 shirts during the year we would have unplanned decumulation of inventories. Suppose the sales are 1050, then the firm will have to sell 50 extra shirts out of the 100 shirts of inventories along with the 1000 shits. This 50 unexpected reduction in inventories is an example of unexpected decumulation of inventories.

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