PRODUCTION IN THE SHORT RUN
Short run: The longest period of time during which at least one of
the inputs cannot be varied
, Long run: The shortest period of time required to alter the amounts
of all inputs in the process
If the input can be changed in the short run, then it is a variable
input.
If the input cannot be changed in the short run (or if it can, it costs
an enormous amount of money), then it is considered a fixed input.
In the long run, all inputs become variable.
Can identify short run and long run as short run outputs a
production of labour only .
Long run has capital and labour in it.
, Increases at a decreasing rate
It still represents 3 general properties of short run
production functions:
1. The production function should pass through the origin
2. Initially, adding extra units of variable input should increase output at
an increasing rate
3. After some point, we should see extra units of the variable input
increasing output by smaller and smaller increments
Short run: The longest period of time during which at least one of
the inputs cannot be varied
, Long run: The shortest period of time required to alter the amounts
of all inputs in the process
If the input can be changed in the short run, then it is a variable
input.
If the input cannot be changed in the short run (or if it can, it costs
an enormous amount of money), then it is considered a fixed input.
In the long run, all inputs become variable.
Can identify short run and long run as short run outputs a
production of labour only .
Long run has capital and labour in it.
, Increases at a decreasing rate
It still represents 3 general properties of short run
production functions:
1. The production function should pass through the origin
2. Initially, adding extra units of variable input should increase output at
an increasing rate
3. After some point, we should see extra units of the variable input
increasing output by smaller and smaller increments
