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Shortrun and Longrun


In the shortrun producers are faced with a problem if they wish to increase their output. They can increase the number of hours their employees work and buy more raw materials, in other words labour and land (raw materials) are variable in the shortrun. The amount of factory space and machinery (capital) are fixed as they can't simply be added. In the shortrun land and labour are variable and capital is fixed.

In the longrun all economic resources are variable as land, labour and capital can all be changed. The only variable that is fixed is the level of technology, but this can be introduced in the very long run, e.g., new IT or production techniques are introduced.

There is no standard measure for these time periods as they vary greatly from industry to industry, e.g., a market trader can increase its capital (the market stall) a lot quicker than ICI (a new chemical plant).




E-mail Steve Margetts