Short Run Production Function vs. Long Run Production Function — What's the Difference?
Edited by Tayyaba Rehman — By Fiza Rafique — Published on December 23, 2023
Short Run Production Function involves fixed and variable factors, while Long Run Production Function allows all factors to change.
Difference Between Short Run Production Function and Long Run Production Function
Table of Contents
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Key Differences
In the Short Run Production Function, at least one factor of production (like capital) is fixed, while others (like labor) can vary. On the other hand, the Long Run Production Function gives firms the flexibility to adjust all inputs, with no fixed factors of production.
The Short Run Production Function reflects immediate reactions of production to changes in variable inputs. In contrast, the Long Run Production Function indicates how firms can adjust production when they can vary all resources over a longer period.
Costs behave differently in the Short Run Production Function compared to the Long Run Production Function. In the short run, there are both fixed and variable costs, whereas in the long run, all costs are potentially variable as firms can reoptimize their production processes.
Scalability is a distinct feature of the Long Run Production Function. Firms can increase or decrease the scale of their operations. Meanwhile, in the Short Run Production Function, firms may face capacity constraints due to fixed factors.
While the Short Run Production Function captures the immediate operational choices of a firm, the Long Run Production Function encapsulates strategic decisions concerning the ideal scale and combination of inputs to optimize production in the future.
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Comparison Chart
Adjustability of Inputs
Some inputs fixed
All inputs can change
Time Frame
Immediate or shorter time period
Extended period allowing all factors to adjust
Cost Behavior
Fixed and variable costs
All costs are variable
Scalability of Production
Limited due to fixed factors
Fully scalable as all factors can change
Primary Focus
Operational decisions
Strategic decisions on scale & input combination
Compare with Definitions
Short Run Production Function
Immediate response of output to changing variable factors.
By understanding the Short Run Production Function, the firm managed variable costs effectively.
Long Run Production Function
A production function allowing all inputs to vary.
The Long Run Production Function allowed the company to consider relocating to a bigger facility.
Short Run Production Function
The immediate operational choices in production.
With a new order influx, the company's Short Run Production Function highlighted labor as the flexible input.
Long Run Production Function
All factors of production can be optimized.
In the Long Run Production Function, they envisioned both increased labor and advanced machinery.
Short Run Production Function
A production function with at least one fixed input.
In the Short Run Production Function, the factory size remains constant, but labor can vary.
Long Run Production Function
Production behavior over an extended time.
Their Long Run Production Function involved plans to fully automate certain processes.
Short Run Production Function
Production where some resources are unchangeable.
The Short Run Production Function of the bakery meant the oven count stayed fixed.
Long Run Production Function
Strategic decisions on scale and input combinations.
Their Long Run Production Function factored in potential global expansions.
Short Run Production Function
Production behavior within a limited time frame.
In analyzing their Short Run Production Function, the company noticed constraints due to their fixed machinery.
Long Run Production Function
Fully flexible production processes over time.
With the Long Run Production Function, the company could envision both downsizing or expanding based on market conditions.
Common Curiosities
Is capital variable in the short run?
No, typically in SRPF, capital is considered a fixed factor while labor is variable.
What is the Law of Diminishing Returns in SRPF?
As you increase a variable input (like labor) while keeping one factor (like capital) fixed, there will eventually be a point where each additional unit of the variable input will produce less additional output than the previous unit.
What is Returns to Scale in the context of LRPF?
It describes how output changes in response to a proportional change in all inputs. If output increases more than proportionally, it's increasing returns to scale; if it increases proportionally, it's constant returns to scale; and if it increases less than proportionally, it's decreasing returns to scale.
How does SRPF affect firm decisions?
Firms use SRPF to determine their optimal production levels and costs in the short term, given their fixed inputs.
Why is understanding both SRPF and LRPF essential for businesses?
Both functions provide insights into production efficiency, costs, and potential profitability across different timeframes.
Is there diminishing returns in the LRPF?
No, the Law of Diminishing Returns applies to the short run. In the long run, firms can adjust all factors to achieve optimal scale.
How does LRPF impact a firm's strategic planning?
LRPF informs firms about their production possibilities when they can adjust all resources, guiding decisions about expansion, contraction, or maintaining current production levels.
What is the Short Run Production Function?
The SRPF describes the relationship between input and output while holding at least one factor of production fixed.
Why is the short run called "short"?
It refers to the time period during which at least one factor of production cannot be changed.
What is the Long Run Production Function?
The LRPF describes the relationship between input and output when all factors of production are variable.
How is the long run different from the short run?
In the long run, all inputs (both capital and labor) can be adjusted, whereas in the short run, at least one input remains fixed.
Do both functions always display the same shape or curve?
No, SRPF typically shows stages of increasing, constant, and then diminishing returns, while LRPF is more concerned with returns to scale.
Can firms be in both the short run and long run simultaneously?
Not exactly. While decisions made in the short run might be influenced by long-run considerations, they operate under different constraints. However, as time progresses, today's long run becomes tomorrow's short run.
How do firms transition from short run to long run?
Firms transition as they adjust their fixed inputs, like investing in more machinery or expanding factory size, to accommodate production changes.
Why is it important to differentiate between the two functions in economic analysis?
Differentiating allows for accurate predictions and assessments of production behaviors and costs over different time horizons, guiding both microeconomic theory and real-world business decisions.
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Fiza RafiqueFiza Rafique is a skilled content writer at AskDifference.com, where she meticulously refines and enhances written pieces. Drawing from her vast editorial expertise, Fiza ensures clarity, accuracy, and precision in every article. Passionate about language, she continually seeks to elevate the quality of content for readers worldwide.
Edited by
Tayyaba RehmanTayyaba Rehman is a distinguished writer, currently serving as a primary contributor to askdifference.com. As a researcher in semantics and etymology, Tayyaba's passion for the complexity of languages and their distinctions has found a perfect home on the platform. Tayyaba delves into the intricacies of language, distinguishing between commonly confused words and phrases, thereby providing clarity for readers worldwide.
