# Change in inventory

1. Inventory change=last period's ending inventory- the current period's ending inventory.
2. Change in inventory= production of the firm during the year- sale of the firm during the year

No doubt in (1) but in (2) "production of the firm during the year- sale of the firm during the year" tells about remaining part which is unsold. How could we say unsold product is "change in inventory"?

Numerical example to this? Gross value added (GVA) = Value of sales by the firm + Value of change in inventories – Value of intermediate goods used by the firm.

Example. In 2018, TATA Motors produced 100,000 cars and sold 70,000. So, the remaining unsold 30,000 cars are added to TATA Motors's inventory (in practical terms, they may be sitting in some warehouses or carparks). Hence, the change in inventory is +30,000 cars.

• So, Gross value added (GVA) = Value of sales by the firm + Value of change in inventories – Value of intermediate goods used by the firm. In this "Value of change in inventories" is 30,000 am I right?
– Raju
Commented Jan 29, 2019 at 6:03

I believe there are two equations:

Production = Gross Value Added + Value Intermediate Goods
and
Production = Sales + Inventory Change

The TATA example refers to the second equation. And (as per your comment) you can substitute the second equation into the first and eliminate production.