Answer to Question #62617 in Macroeconomics for Akshara Awasthi

Question

What is the difference between long run classical model and short run?

Answer 1

Short Run Classical model is defined as the decision period that takes into consideration that during the time-span of implementation of a certain decision there would be some constraints where some things would remain constant. For example, in short run one cannot have a big-scale plant. This is because it would take capital investment and time to put them together.
Long Run Classical Model is when all decision variables are flexible. From the above example, this is when capital accumulation has been enough to adjust plant size instantaneously.