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Difference Between Short Run and Long Run

This document compares short run and long run concepts in economics. In the short run, at least one input like plant size cannot be changed. Only variable inputs like labor and materials can adjust. Short run decisions are reversible. In the long run, all inputs can vary and plant size can change. Long run decisions are not easily reversed. Short run demand immediately reacts to price and income changes, while long run demand adjusts over time as markets respond to changes. Short run costs have fixed inputs while long run costs are all variable. Supply responds less in the short run than the long run due to diminishing returns with fixed plant size.

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Muhammad Riaz
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1K views6 pages

Difference Between Short Run and Long Run

This document compares short run and long run concepts in economics. In the short run, at least one input like plant size cannot be changed. Only variable inputs like labor and materials can adjust. Short run decisions are reversible. In the long run, all inputs can vary and plant size can change. Long run decisions are not easily reversed. Short run demand immediately reacts to price and income changes, while long run demand adjusts over time as markets respond to changes. Short run costs have fixed inputs while long run costs are all variable. Supply responds less in the short run than the long run due to diminishing returns with fixed plant size.

Uploaded by

Muhammad Riaz
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Difference between

Short Run and long


Run
PRESENTING BY: MUHAMMAD RIAZ

Definition:
Long Run:
Short Run:
A time period when at
least one input, such as
plant size, cannot be
changed
Plant Size
The physical size of the
factories that a firm owns and
operates to produce its output.

The time period in which


all factors of production
can be different

Difference:
Long Run:
Short Run:
Other resources used by
the firm (such as labor,
raw materials, and
energy) can be changed
in the short run.
Short-run decisions are
easily reversed.

Long-run decisions are


not easily reversed.

Short run demand vs. long run


demand:
Short run demand is the demand with its
immediate reaction to price changes, income
fluctuations and so on.
Long run demand is that demand which will
ultimately exist as a result of the changes in
pricing, promotion or product improvement, after
enough time is allowed to let the market adjust
itself to the given solution.

Long Run and Short run Cost


Long run costs have no fixed factors of production
Short run costs have fixed factors and variables that impact production.
Variable cost A cost that changes with the change in volume of activity of
an organization.
Examples variable costs include raw materials, packaging, and labor.
Which are directly involved with company's manufacturing process.

Fixed cost Business expenses that are not dependent on the level of goods
or services produced by the business.
Examples Fixed costs often include land, capital, entrepreneur, etc.

Short Run vs. Long Run


Supply Curves
Long Run response to change in price is much
greater than Short Run response.
The Long Run supply curves is much
flatter than the short run curve, means
that the quantity of apple is increases
by a larger amount in the long run.
The Short Run supply curve is much
steeper than the long run supply curve
because there are diminishing returns in
the short run.

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