Time period is an important influencing factor on production. Usually we divide time period into two broad categories, viz. short period also called short-run and long period also known as long – run. In between these two we also have medium period and beyond the long – run we also have secular period or very long – run. But short – run and long – run are the very commonly used terms in production analysis.
We know that production requires inputs of production such as land, raw materials, labour, capital, etc. the quantity of some of these inputs can be changed without loss of time, i.e. as and when desired. Such factors are called variable factors. One the other hand, some other factors, like machinery, plant, factory building, etc. cannot be changed immediately. Their supply can however be increased over time, say over some months or years. But for the time being their supply is fixed and cannot be changed. Such factors whose supply remains unchanged at a given time period are called fixed factors.
Short-run is that time period in which some factors remain fixed while the supply of others can be changed. On the other hand, long – run is that period of time over which supply of all factors can be changed. There are no fixed factors in the long-run; all factors become variable.
This distinction between short period and long period does not refer to any fixed time duration such as number of days, months or years. It refers to time duration over which supply of some factors cannot be changed and therefore they remain fixed. This duration may be a few weeks, a few months or a few years depending upon when additional supplies become available. Thus short period may comprise of only a few days when we talk about simple capital goods like a spinning wheel, a few months for supply of automatic spinning machines and many years for setting up new power plants to make power supply a variable factor. Hence the distinction between the short and the long period is essentially an economic distinction between time periods when some factors remain fixed and other variable and the time when all factors become variable.SUBMIT ASSIGNMENT NOW!