Student Name: Abass Gbla  

Student Id: 10102295
Course Name/Code: ECM 203 
Assignment Question: 
Differentiate between the short run and
long run periods in production and explain
the objectives of production in the Islamic
economy.

ATTEMPT COUNT: 1 
 
 
 
 
 
INTRODUCTION 
The concept of production has been evolving since ancient period until today. The
production of goods and services is a significant economic activity both from the individual as
well as the social points of view and has played a major role in the growth of economies across
the world. Thus, the standard of living of people greatly depends on the quantity of goods
produced and type of production. And the growth of an economy is determined by the level of
its production activities. i.e. countries with the highest outputs are economically stronger than
those with the least outputs. The process of economic growth entails the increasing level of
production in the economy.

PRODUCTION
Production in common terms simply means the transformation of inputs such as raw
materials, capital, labour, time, etc. into an output of goods and services produced by a firm
within a given market. Thus, it enables the supply of goods that allows human needs and wants
to be satisfied. However, production concept is limited to ‘manufacturing of goods’. In
managerial terms, it simply means the creation of utility. Whereas in economics, it is a process
through which inputs such as human resource, raw material, capital, and time are transform
into different more useful goods to satisfy human needs and want.

PRODUCTION PERIOD/FUNCTION EXPLAINED
Production period is a good way to comprehend and analyze production operations of a
business, which then gives insight into market supply. In common context, the concept of
production function, experts in economics have developed a number of renowned distinct time
periods commonly called short run, and long run production periods. These periods can be
explain as having a common activity relationship between input and output produced, which
shows the highest amount of outputs to be produced in a given production facility utilizing all
factors of production.
However, production function basically is a useful manufacturing tool used to analyze
the relationship between input and output. It expresses the relationship between production
input and output, and further showcase the highest volume of outputs that can be derived from
a set of inputs using the actual state of technology in the production process.

Moreover, it can be mathematically expressed as Q=f (K, L)

Q is quantity of output produced.
K is capital units.
L is labor units.
F is the production technology relating the inputs to output.
DIFFERENCES BETWEEN THE SHORT RUN AND
LONG RUN PERIODS IN PRODUCTION
Basically, there is no well-known production periods of time that can be used to
differentiate a short run from a long run, as in most cases, what is normally regarded a short
run and long run periods varies from industry to industry. The following example will clearly
differentiate between short run and long run periods in production.

UMMAH Ventures LTD is a producer of wooden furniture, and they are in need of the
following inputs: wood (raw materials), labor (human resource), machines (capital), and
production facility (factory). Customer demand for the product has increased significantly over
the last month, and so the company would like to add up to its production capacity in order to
increase its output level to satisfy customers increase in demand. With this prevailing
circumstance, the company can request from its suppliers more raw materials and add labor
(human resource) supply base by introducing work overtime to workers. It is obvious that these
factors of production can be increased in the short run production period and as such they
represent the variable inputs of the company. Thus, other inputs such as capital/machinery and
new production facility cannot be achieved in the short run. And there will be deny in the
procurement and installation of new machinery and technical training of workers on its use. A
new production facility construction will also need a longer period of time to complete or
procure.  Therefore, these factors of production are fixed. In addition to this, only old producers
will be able to satisfy this growing increase in demand in the wood (furniture) market, in the
short run period, by adding labor supply and other direct inputs such as raw materials. By
contrast, in the long run period, new market players or businesses and other existing
competitors have the chance to come into the market by procuring capital assets/new
machinery and construction of production plants or factories.

OBJECTIVES OF PRODUCTION IN THE ISLAMIC ECONOMY

In very simple terms, we can characterize or explain the objectives of production in an

Islamic economy as relating to economic well-being. Hence, the economic well-being in an
Islamic economy is not, basically, a goal that can be achieved alone or independent of Islam
core principles and values. Producers should make available, supply and use wealth in such a
way that they are able to live a good life, free in total obedience to Allah, as just and equal
humans, being good to one another and working together as one Ummah. This can be
mentioned in a number of specific objectives.

The following explained clearly the prominent objectives of production in an Islamic

economy according to M.N Siddiqi (1992):

 The first objective of production in an Islamic economy is to fulfill or satisfy human basic
needs such as food, clothing, shelter, health care and education etc.
 Providing equal opportunity to all and discouraging the hoarding of wealth and
minimizing inequality in the equitable distribution of earnings and wealth from
capitalists so as, among other things, wealth does not become a tool for domination of
the rest of humanity by capitalists.
 To guarantee people all the rights to pursue moral excellence.
  Making sure that there is stability and economic growth, which is vital for realization of
the above objectives.

CONCLUSION
Conclusively, the short run period is considered a period of time which is too low to
enable a firm to change its plant/factory capacity, yet good enough to allow a change to take
place. It is a period of time wherein at least one factor of production or input is fixed in supply,
i.e. it cannot be added or reduced, and the rest of the other factors of production are variable
in nature. Normally, the firm’s capital inputs are said to be fixed, and the activity level can be
changed by changing the volume of other inputs such as labour, raw material, capital etc. Thus,
it is very difficult for the firm to substitute the capital input in order to increase the level of
output produced, among all factors of production. On the other hand, long run period is a time
which is long enough to allow a firm or an enterprise to change all inputs. During this period, all
of the firm’s inputs can be altered giving it the opportunity to improve the scale of its outputs.
It is a time period in which all the other factors of production of a firm are variable. However, at
this period, the firm can operate at different activity levels and it can alter and arrange all the
factors of production and level of output produced according to its business environment. So, it
has the adaptability of igniting between two scales.

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