Difference between Stock and Flow

Every economy has a given set of natural resources, but it goes through the flow of production that adds certain value addition in these types of resources and returns produced goods and services, which differentiates a rich economy from that of a poor. An economy produces a lot of commodities and services; therefore, to understand how an economy functions, understanding the terms related to production activities becomes necessary.

Stock

When a variable is measured at a specific point of time, it is known as stock. The goods that are consumed over a period of time that do not wear out immediately, or intermediate goods, which do not change over time or can be measured at a given point of time are called stocks.

For example, the number of units of goods in the warehouse on a specific date is stock. Certainly, one can add or subtract the quantity of stock at any time, but when we study the change in stocks over a period of time, it comes under the concept of flow.

Flow

Flow is a concept or a variable, measured over a period of time. As flow variables are measured for a period of time, these variables are time dimensional.

For example, when we take into account the production of cars by different automobile companies from 2000 to 2022, we stress the importance of specifying the time period. A fun example to understand would be to take a concept that you are quite familiar with, i.e. grades. When you observe your grades over two terms, it becomes a flow variable.

Similarly, concepts like income, average, price, or profit have meaning when studied from the point of time. Thus, generally, these kinds of concepts lie under low variables. One can easily identify these variables by the period mentioned along with it like, per year, monthly, quarterly, etc.