Distinguish between short run and long run.

1.	Distinguish between short run and long run.
Answer» In the short run, some factor inputs are fixed while the others are variable. Only increasing the quantity of the variable factors can increase the production. The time is so limited that the firms cannot contract to hire additional units of the fixed factors. This sets limit to the maximum quantity of output that a firm can turn out. In the long run, all the factors of production become variable. A firm can install a new plant or construct a new building in response to increased demand. The distinction between the fixed factors and the variable factors becomes irrelevant. The quantity of output to be produced by a firm will range from zero to an indefinite quantity.

Answer»

In the short run, some factor inputs are fixed while the others are variable. Only increasing the quantity of the variable factors can increase the production. The time is so limited that the firms cannot contract to hire additional units of the fixed factors. This sets limit to the maximum quantity of output that a firm can turn out.

In the long run, all the factors of production become variable. A firm can install a new plant or construct a new building in response to increased demand. The distinction between the fixed factors and the variable factors becomes irrelevant. The quantity of output to be produced by a firm will range from zero to an indefinite quantity.

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