PRODUCTION

DECISIONS IN LONG
RUN/SHORT RUN
GROUP M2
MEMBERS: APOORVA SHARMA
CYRIL ISAAC
MRINAL GOEL
PRANAV SHETE
LONG RUN & SHORT RUN

• Period of time in which the quantity of at least one input is fixed and other inputs can be varied.
• Period of time in which the quantities of all inputs can be varied.

Qx= f(L, K¯)

Here,
Qx= Output of commodity-X
L = Labour, a variable factor
K = Capital, a fixed factor
DIFFERENCE

SHORT RUN LONG RUN

The activity level does not change in the firm can expand or reduce the
the short run production function activity levels in the long run
production function

Short-run decisions are made in the long run decisions are made looking
present. into the future

Short-run decisions are mainly mainly concerned with changes in

concerned with changes in production capacity
APPLICATION-AUTOMOBILE INDUSTRY
SHORT TERM DECISIONS

• Automobile industry focus on increasing the production in short term

during festive season.
• They hire more labors to meet the demand in industry.
• The time period can vary between 3 to 4 months.
Qx= f(L, K¯)
Here,
Qx= Output of commodity-X
L = Labour, a variable factor
K = Capital, a fixed factor
LONGTERM DECISIONS
LONGTERM DECISIONS

• With change in Technology- The transition of automobiles towards

electric mobility is inevitable
• Rapid R&D investments needed to be done for the industry.
• More experienced labor would be needed.
Qx= f(L¯, K¯)
Here,
Qx= Output of commodity-X
L = Labour, a variable factor
K = Capital, a variable factor