Question

Suppose a firm produces a PERISHABLE good: produces $10 million worth of final goods only sells $9 million worth $1 million worth of final goods spoils Does this violate the expenditure = output identity?

Answer 1

Answer:

No

Explanation:

This does not violate the expenditure = output identity because this idenity says that goods-in-stock /unsold goods produced and ready for sale but not yet sold (inventory) are also a part of output, which if sold in the next accounting period, would still be calculated as sale in the current period, since it is the sale of output produced in the current year.