As the ratio of the cost of overstocking to the cost of understocking gets smaller,the optimal level of product availability decreases.

Question

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As the ratio of the cost of overstocking to the cost of understocking gets smaller, it implies that the cost of understocking (missing out on sales) is becoming relatively more significant compared to the cost of overstocking (having excess inventory). Therefore, to minimize the total cost, a company would aim to increase the level of product availability to reduce the chances of understocking, thus increasing the optimal level of product availability, not decreasing it.

As the Ratio of the Cost of Overstocking to the Cost