Short period analysis - theory of production, Microeconomics

SHORT PERIOD ANALYSIS:

Short period in production refers to a time when some inputs remain fixed. A fixed input is one, whose quantity cannot be changed readily, whereas, a variable input varies with production. Inputs like land, building and major pieces of machinery cannot be varied easily and, therefore, can be called fixed inputs. On the other hand, inputs like labour (labour hours), raw materials, and processed materials can be easily increased or decreased. Therefore, these are categorised as variable inputs. Depending on whether inputs can be kept fixed or not, we have a short period or a long period. To put this more precisely, if inputs being used in the production process have just enough time such that they cannot be varied, then the analysis pertains to the short-run. On the other hand, if the inputs employed have enough time such that they are amenable to variation, then the analysis is based on the frame work of long-run. Generally, the firms do not readily change their capital, which could be land, machinery, managerial and technical  personnel. Therefore, these are fixed input in the short-run. When we treat these under Κ, the production function can be written as

1955_SHORT PERIOD ANALYSIS -.png

where L = Labour, a variable factor  

K = Capital, a fixed factor  

 

Posted Date: 10/26/2012 6:03:26 AM | Location : United States







Related Discussions:- Short period analysis - theory of production, Assignment Help, Ask Question on Short period analysis - theory of production, Get Answer, Expert's Help, Short period analysis - theory of production Discussions

Write discussion on Short period analysis - theory of production
Your posts are moderated
Related Questions
#questioSuppose the US and Mexico both produce semiconductors and auto parts and the US has a comparative advantage in semiconductors while Mexico has a comparative advantage in au

Development Banks Banks that function as coordinating and intermediary industries to raise capital attract investment, and giving technical assistance for the economic develop

ELEMENTARY THEORY OF PRICE FORMATION: DEMAND-SUPPLY ANALYSIS: We discuss the elementary theory of price formation. Demand curve in the market is derived from the aggregate con

FUTURE DIRECTIONS: It is often said that the difficult things are the beautiful things, and if they are as vital for healthy national development as an economy, society and po

how to solve Min (x+y/2, 2y+x, 3x)

Explain the difference between a change in quantity demanded and a change in demand. Change in quantity demanded" refers to movement with the demand curve.  For instance, if th

What are the two main forms of economic distribution? What is the difference between them?   The two major forms of economic distribution are exchange and transfer. Exchange in

what is the definition of economic system?

Suggestions For the last 60 years the Bretton Woods institutions have played an essential role in ensuring global financial stability and fostering economic growth and develop

Exchange Rate Policy: After the second amendment to the Articles of Agreement of IMF which came into effect on April 1, 1978, every member is free to choose its own exchange r