Short Run (Economics) - Explained
What is the Short Run?
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Table of ContentsWhat is the Short Run?How does the Short Run Work? Short Run Cost ExamplesAcademic Research on the Short Run
What is the Short Run?
The short run is a term often used in economics, it describes a future period during which one input is fixed while others are variable. The variation in the inputs is owing to the fact that the time available is not enough for all inputs to be changed, hence, some inputs are fixed while others are changed. When used in economics, the short run reflects the behavior of an economy which is dependent on the time available for it to change or react to certain inputs. In the short run, both fixed costs and variable costs and inputs are available to economies, firms and industries. This term is directly connected to the firm being studied and bot a particular time.
How does the Short Run Work?
Short run differs from long run in the sense that it features both fixed and variable factors which the long run does not reflect. In the short run, output, wages and prices in a firm do not exercise full freedom in terms of adjusting to achieve a goal. There are no fixed costs in the long run which means factors of production in a firm can reach an equilibrium. The production outputs of a firm can be aligned to realize profit for the company. The long run gives room for the operations of a firm to be adjusted in order to meet a change in demand.
Short Run Cost Examples
In the short run, if pharmaceutical company for instance notices that there is a lower demand for drugs in a particular year, the factors of production cannot be fully adjusted to suit the change in demand, instead, the company keeps producing pharmaceutical products as its does ordinarily. Likewise, if there is a decline in the prices of products, the company keeps producing and accru units of production. In certain situations, companies decide whether to use the short run or long run. Here are some points you should know about the short run;
- The short run refers to a time in the future where one or more inputs will be fixed and others are variable.
- The short run does not refer to a specific time, rather, it refers to the form or company being studied.
- According to the short run, the behaviours of a firm or an economy will vary depending on the time available for a company to react to inputs.
- The short run differs from the long run in that the short run has both fixed and variable inputs while the long run has no fixed inputs.