Short run vs Long Run



Short Run

  • short run is that period of time in which a producer can not increase the supply of all factors.
  • In short run atleast one factor is fixed.
  • A Producer has certain commitments in the short run.

Long Run

  • In the long run, the firm can change everything, all the factors of production are variable
  • No costs are fixed, All costs become variable
  • Producer can make major decisions; Investments can be made in the long run.
  • In long run , a firm can Chooses technology, can make certain investments.
  • can Make long term contractual commitments.

Time Frame of short and Long run
  • There is no specific length to the long or short run.
  • It depends on industry to industry.
  • Example - for a steel plant, 1 year is short run. But for a small industry, it is a long run.
  • Once the firm makes its long run decisions, then it chooses Long and Short Run according to the time.

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