Answer to Question #113803 in Microeconomics for Dennis mubanda

Question

The difference between short run and long run in microeconomics

Answer 1

The difference in short run and long run are seen to vary from one industry to another. In microeconomics, they are entirely dependent on the number of variable and/or fixed inputs that affect the production output.

They can be differentiated base on:

1.     The period of time:

Long Run: The time period in which all factors of production can be varied while decisions taking are not easily reversed.

Short Run:  A time period in which a company can increase production by adding more raw materials and more labor but fixed input such as plant size, cannot be changed. Short-run decisions are easily reversed.

2.     Cost:

the long run cost at a particular period is determine by the state of economy. i.e inflation or taxes can affect wages or salary of workers. While short run cost can be fixed i.e the cost of fixed and variable factor that can affect production are fixed.

3.     Demand:

Short run demand is that demand with its immediate reaction to price changes in goods and services of the company

Long run demand is that demand which will allowed for enough time to adjust to changes in changes in pricing, promotion or product improvement.

4.     Supply curve:

The Long Run supply curve is much flatter than the short run curve which is steeper. Means that the quantity of a product is increases by a larger amount in the long run supply curve.