In this topic we are going to learn about a topic called Short Run Production Function vs Long Run Production Function or Differences Between Short Run Production Function and Long Run Production Function. Welcome to Poly Notes Hub, a leading destination for Diploma Engineering Notes.
Author Name: Arun Paul.
Short Run Production Function vs Long Run Production Function
Below we listed some Differences Between Short Run Production Function and Long Run Production Function –
| Aspect | Short Run Production Function | Long Run Production Function |
|---|---|---|
| Definition | Refers to the production process when at least one input is fixed, typically capital (e.g., machinery, equipment). | Represents the production process when all inputs, including capital, are variable, allowing for maximum flexibility. |
| Time Horizon | Short period, where some factors of production are fixed. | Long period, where all factors of production are variable. |
| Flexibility | Limited flexibility as at least one input is fixed. | Maximum flexibility as all inputs are variable. |
| Adjustment Capability | Limited ability to adjust inputs in response to changes in output demand. | Higher ability to adjust inputs in response to changes in output demand. |
| Law of Diminishing Returns | May experience diminishing returns due to the fixed factor. | May still experience diminishing returns, but adjustments can mitigate its impact to some extent. |
| Decision Making | Focuses on immediate decisions regarding input usage. | Allows for strategic planning and optimization of all inputs. |
| Planning | Less scope for long-term planning as some inputs are fixed. | Encourages long-term planning and investment in all inputs. |