Short Run & Long Run

The concept of short run and long run is used in economic theories like production theory, cost theory etc.

In production, theory short run refers to a period of time in which supply of certain inputs such as plant, building, machinery etc is fixed or is inelastic. In the short run therefore, increasing the use of only one variable input as labour and raw material can increase production of a commodity.

The long run refers to a period of time in which the supply of all the inputs is elastic, but not enough to permit a change in technology. That is, in the long run, all the inputs are variable. Therefore, in the end, production of or commodity can be increased by employing more of both variable and fixed inputs.

Short run costs are the costs that vary with the variation in input, the size of the firm remaining the same. In the other words, short run costs are the same as variable costs. Long run costs, on the other hand are the costs, which are incurred on the fixed assets like plant, building, machinery etc.