Short run versus long run, Microeconomics

The Short Run versus long Run

- Short-run:

  • Period of time in which the quantities of one or more production factors cannot be changed.
  • These inputs are called as fixed inputs.

- Long-run

  • Amount of time required to make the entire production inputs variable.

    1714_short run vs long run.png

    Observations:

 1)  With the additional workers, output (Q) increases, reaches the maximum limit, and then decreases.

  2) The average product of labor (or AP), or output per worker, increases 1st and then decreases.
1301_short run vs long run1.png

3) The marginal product of labor (or MP), or output of additional worker, increases quickly initially and then decreases and becomes negative.
1062_short run vs long run2.png


2430_short run vs long run3.png

401_short run vs long run4.png

Observations:

- When MP = 0, TP is at the maximum

- When MP > AP, AP is gets increased

- When MP < AP, AP  is gets decreased

- When MP = AP, AP is at the maximum

AP = slope of line from the origin to a point on TP, lines b, and c.

 MP = slope of a tangent to any point on the TP line, lines a and c.

Posted Date: 10/10/2012 9:21:48 AM | Location : United States







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