The short run is the period in which a firm has at least one fixed input. The long run is the period in which every input can change.
This lesson is part of production and costs in SPM Economics. Everything in the next lesson, total, average and marginal quantities, assumes you can tell these two apart.
How do I tell the short run from the long run?
Ask one question: can the firm change every input, or is something stuck?
If something is stuck, such as premises, a large machine or a rental contract, it is the short run. If the firm can change everything, including its size, it is the long run.
Time passing matters only because it decides what can change. The label comes from the inputs, not the calendar.
Worked example: a fictional furniture workshop
The workshop rents a small shop with two saws. The rental lasts for two more years, and the owner can hire or release workers at any time.
- The shop and saws are fixed for now, so this is the short run.
- The workers and wood are variable, because the owner can change them this month.
- If the owner waits until the lease ends and moves to a larger shop with six saws, all inputs have changed, which is the long run.
| Input | Short run | Long run |
|---|---|---|
| Number of workers | Variable | Variable |
| Wood and glue | Variable | Variable |
| Shop size | Fixed | Variable |
| Number of saws | Fixed | Variable |
The firm can raise output in the short run only by using more of the variable inputs with the same saws. In the long run it can also expand the workshop.
The mistake that costs marks
The common slip is to write “the short run is less than one year”. The answer looks precise, but it is wrong, because no standard length exists.
A fishing cooperative may replace its boat in six months, and a steel plant may need ten years to build a new furnace. A year means nothing without knowing what can change.
| Answer | Why it fails or passes |
|---|---|
| “Short run is under one year” | Uses a time length that Economics does not define |
| “Short run is when at least one input is fixed” | Uses the input test, which is what the syllabus means |
Check yourself
A fictional bus company has 10 buses on a 5-year lease. The manager can hire more drivers next week. Is the company in the short run or the long run, and name one fixed and one variable input?
Answer
It is the short run, because the fleet of 10 buses is fixed under the lease. The buses are a fixed input. The number of drivers is a variable input, since the manager can change it next week.
It would become the long run only when the company can change every input, including the size of its fleet.
What to study next
Continue with calculating total, average and marginal quantities, which works inside the short run. Then test yourself on the production and costs practice set.
If you want a teacher to give you scenarios and check your reasoning, see online one-to-one Economics tuition.