SHORT RUN VS LONG RUN PRODUCTION FUNCTION

SHORT RUN VS LONG RUN PRODUCTION FUNCTION – Notes for B.Com/BBA/ MBA/ M.com

Table of Contents

SHORT RUN VS LONG RUN Production Function:

SHORT PERIOD PRODUCTION FUNCTIONS: The time period in which some factors of production are fixed while some factors of production are variable, is known as short period. It explains the technical relationship between outputs and inputs in the short run. The fixed factor is land and the variable factor is capital. It is also known as Variable proportions type production function.

LONG PERIOD PRODUCTION FUNCTION: The time period in which all the factors of production are variable is known as long period production function. It means that all the factors of production can be changed in the long period and there exists no difference between the fixed and variable factors of production. 

SHORT RUN VS LONG RUN PRODUCTION FUNCTION

BASIS OF DIFFERENCE SHORT PERIOD PRODUCTION FUNCTION LONG PERIOD PRODUCTION FUNCTION
MEANING It explains the technical relationship between outputs and inputs in the short run. It explains the technical relationship between inputs and outputs in the long run.
KNOWN AS The short period production function is also known as variable proportions type production function as in this the capital- labour ratio changes. The long period production function is also known as constant proportions type production function as in this capital- labor ratio remains constant and do not change.
LAW APPLICABLE The short run production function can be explained with the help of Law of returns to factor. The long run production function can be explained with the help of Law of Returns to scale.
CURVE The curve of short period production function is straight line parallel to horizontal axis. The curve of long run production function is upward sloping curve.
NATURE OF FACTORS In this, One factor ‘land’ is fixed and other factor ‘labour’ is variable.  In this, both factors are variable.
Also StudyAlso StudyAlso StudyAlso Study
Theory of DemandLaw of DemandDemand FunctionExceptions of law of demand
Elasticity of demandChange in demandPrice elasticity of demandLaw of demand Vs Elasticity of demand
Factors affecting price elasticity of demandProduction functionShort run vs long run production functionLaw of variable proportions
Types of demandManagerial economicsCharacteristics of managerial economicsScope of managerial economics
Utility analysisLaw of diminishing marginal utilityLaw of equi marginal utilityConsumers Equilibrium
Indifference curve analysisConsumer equilibrium using indifference curve analysisRelationship between TP, AP and MPLaw of increasing returns
Law of diminishing returnsLaw of constant returnsReturns to ScaleEconomies and diseconomies of scale
Concept of costsRelationship between AC and MCTraditional theory of costsModern theory of costs
Explicit vs Implicit costsRevenuePerfect competitionMonopoly 
Price discriminationDifference between perfect competition and monopolyPerfect Vs Monopolistic competitionMonopoly and monopolistic competition
Product differentiation strategyMonopolistic competitionNational Income in IndiaMeasurement of national income in India
Consumption functionKeynes Psychological law of consumption
SHORT RUN VS LONG RUN PRODUCTION FUNCTION
PRODUCTION FUNCTION

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