Say an automobile firm is a sole manufacturer and distributor of cars, scooters and other vehicles in an economy. The firm suddenly experiences an increase in inventory available at their manufacturing units and also at their outlets. The manager of the firm realises that their money would get blocked in inventory if they keep the production on the same pace. The firm is facing which of the following situations?
Answer & explanation
Correct answer: option 2
There is excess supply of automobile in the market, that's why unsold stock increased.