Microeconomics,, 16th Canadian Edition

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period of time over which these purchases occurred. Two
thousand dozen eggs per hour would indicate a much more
active market in eggs than would 2000 dozen eggs per month.


In contrast, a stock variable is a variable whose value has
meaning at a point in time. Thus, the number of eggs in the egg
producer’s warehouse on a particular day—for example, 10 000
dozen eggs on September 3, 2019—is a stock variable. All
those eggs are there at one time, and they remain there until
something happens to change the stock held in the warehouse.


The terminology of stocks and flows can be understood using
an analogy to a bathtub. At any moment, the tub holds so much
water. This is the stock, and it can be measured in terms of the
volume of water, say, 100 litres. There might also be water
flowing into the tub from the tap; this flow is measured as so
much water per unit time, say, 10 litres per minute.


The distinction between stocks and flows is important. Failure
to keep them straight is a common source of error. Note, for
example, that a stock variable and a flow variable cannot be
added together without specifying some time period for which
the flow persists. We cannot add the stock of 100 litres of
water in the tub to the flow of 10 litres per minute to get 110
litres. The new stock of water will depend on how long the flow
persists; if it lasts for 20 minutes, the new stock will be 300
litres; if the flow persists for 60 minutes, the new stock will be
700 litres (or the tub will overflow!).

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