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.