Short Run
Candlefocus EditorThe concept of the short run is significant to economics because it allows businesses and other producers to analyze the impact of changes in one factor on their overall production. For example, in the short run, a business may increase its production output by adjusting the number of workers employed for that specific period of time. If the number of workers is increased, the output will likely increase; however, the costs associated with labour may also increase. In contrast, in the long run, all factors such as number of workers, technology and capital can be adjusted to optimize output.
Short run decision making is a way for companies to maximize their profits within a set period of time given the inputs they currently have. In other words, the decision making focuses on maximizing profits within the existing constraints. For example, a company may be faced with the decision as to whether they should increase production in the short run in order to meet current demand. In this instance, the firm must consider the costs associated with increased labour and capital, as well as the potential increase in profits.
The short run has one major downside, which is that it does not allow for the adjustment of all input factors. Since the amount of capital, technology and workers are all fixed in the short run, any changes made to one input will cause changes in the level of output. However, in the long run, all of these inputs can be adjusted in order to produce the most efficient output level.
Overall, the concept of the short run is beneficial for businesses, as it allows them to analyze the impact of changes in one input on their overall production and optimize their profits in a given period of time. This can help businesses adapt to changes in demand and competitive pressures, while minimizing costs and maximizing profits in the present.