- 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.
- 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.