Time Perspective Principle, Principle of Managerial Economics Assignment Help

Basic principles of managerial economics - Time Perspective Principle, Principle of Managerial Economics

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Time Perspective Principle

The time perspective principle states that a manager should consider both short run & long run while taking decisions. Economists related to short run as the current period whereas long run as a future period. Some inputs of production are regarded as fixed in that short run and it is a time period where the existing producers respond to price changes by using more or may be less of their variable inputs. From the standpoint of consumers the short run is a period in which they respond to price changes with the prevalent tastes & preferences.

Long run is a time period known in which new sellers may enter a market or a seller already existing may leave. This time period is sufficient for both old & new sellers to vary all their factors of production. From the standpoint of consumers" long run provides enough time to respond to price changes by actually changing their tastes & preferences or their alternative goods and services.

Some companies provide a good free of cost, with a popular brand, in the current period with an eye on the future profits. Promos have traditionally been used to gain market share. HLL, for instance has done- promos of Fair & Lovely on Lux soaps as the company is of the view that a large proportion of population does not use F&L in the current period. The promos have been done to create and maintain demand for the product in future. 

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