Long run and short run
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The short-run is a time period during which at least one factor of production is fixed.
In the short run, then, output can be increased only by using more variable factors.
If an airline wanted to carry more passengers in response to a rise in demand, it could possibly accommodate more passengers on existing flights if there was space. It could possibly increase the number of flights with its existing fleet, by hiring more crew and using more fuel. But in the short run, it could not buy more planes: there would not be time for them to be built.
The long-run is a time period long enough for all inputs to be varied.
Given long enough, a firm can build additional factories and install new machines. The actual length of the short run will differ from firm to firm. It is not a fixed period of time.
It takes a farmer a year to obtain new land, buildings and equipment, the short run is any time period up to a year and the long run is any time period longer than a year. If it takes an airline two years to obtain an extra plane, the short run is any period up to two years and the long run is any period longer than two years
Very short run (immediate run)
A firm may not be able to ask employers to work on short notice at any given time, or order more stock, at any given time.
In the short term, the company can only do things like change prices, give special deals, or use a queuing system to manage high demand.
One factor of production, such as capital, is fixed in the short run.
This indicates that if a company wants to improve output, it can hire more people but not invest more money in the short term (it takes time to expand.)
As a result, we may experience diminishing marginal gains in the near run, and marginal costs may begin to rise swiftly.
Also, we can find prices and wages out of equilibrium in the short run, for example, a sudden surge in demand may lead to higher prices, but firms lack the capacity to respond and increase supply.
The long run is a situation where all main factors of production are variable.
The company has enough time to expand its factory and respond to changing demand.
In the long run:
We have enough time to construct a larger factory.
A company can enter or exit a market.
Prices have time to adjust.
For example, we may see a short spike in pricing, but supply will expand to match it in the long run.
The long run might be anything from six months to a year.
Price elasticity of demand can fluctuate over time - for example, people may become more sensitive to price changes over time, but in the short run, people will continue to buy a product they are familiar with.
Very long run
In the very long run, technology and variables beyond a firm's control can drastically change, e.g., in the very long run:
Current working practises may become obsolete as a result of new technology. For example, the rise of the internet and digital downloading has changed the face of the music industry, making it difficult to make a profit from single sales.
Government policy may change, for example, the UK labour market has been restructured by lowering trade union power.
Changes in society.
For example, the First World War increased the number of women in the workforce and altered people's perceptions of what tasks women could undertake.