Theory Of Economics

Term Paper Title	Theory Of Economics
# of Words	340
# of Pages (250 words per page double spaced)	1.36

theory of economics

theory

THE THEORY OF STORAGE.  �THE SUPPLY OF STORAGE REFERS
NOT TO THE SUPPLY Of STORAGE SPACE BUT TO THE SUPPLY OF
COMMODITIES AS INVENTORIES.  IN GENERAL A SUPPLIER OF
STORAGE IS ANYONE WHO HOLDS TITLE TO STOCKS WITH A VIEW
TO THEIR FUTURE SALE, EITHER IN THEIR PRESENT OR IN A
MODIFIED FORM.  SINCE PRODUCTION IS NOT STABLE FOR ALL
COMMODITIES ESPECIALLY ARGICULTURAL CONSUMERS DEMAND
THAT THE STORAGE FUNCTION BE SO PERFORMED THAT THE
FLOW OF COMMODITIES FOR SALE WILL BE MADE RELATIVELY
STABLE.� (BRENNAN P. 51)

�the theory purports to provide an explanation of
the holding of all stocks, including those for which
there is not an active future market.  it will be shown
that, on the supply side, in addition to the marginal
expenditure on physical storage and the marginal
convenience yield another variable, a risk premium, is
required to explain the holding of stocks as
functions of price spreads.  in the empirical part of
the study the theory will be applied to stocks of
several agricultural commodities.  the risk premium for
each commodity will be measured residually under
specified conditions by deducting form t...

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