  We study a production-inventory system with two customer classes with
different priorities which are admitted to the system following a flexible
admission control scheme. The inventory management is according to a base stock
policy and arriving demand which finds the inventory depleted is lost (lost
sales). We analyse the global balance equations of the associated Markov
process and derive structural properties of the steady state distribution which
provide insights into the equilibrium behaviour of the system. We derive a
sufficient condition for ergodicity using the Foster-Lyapunov stability
criterion. For a special case we show that the condition is necessary as well.
