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Economic Discussion: Case Study
Short-run, as used in economic, implies a
period within which at least a single quantity of a particular input is fixed,
and the values of other inputs are variables. During this period, one item is
considered to remain constant even when the production output is varied. On the
other hand, long-run implies that quantities of all values of inputs can be
varied to achieve the desired outcome. Additionally, short-run implies a limited
period (typically one year) through which a firm’s performance is measured,
while long-run means an extended period (usually more than one year) used to
assess the behavior of production inputs in a company.
Fixed inputs are essential production equipment and factors which do not vary even when production output is changed. A good example of a fixed input is machinery. Variable inputs are resources that change due to variation in the production activities—for example, raw materials. From the case study, the one full-time administration employee (in Sarah's Bakery) is a fixed input because even when production activities reduce, the full-time employee has to...
