Short and Long run || Variable and Fixed factor in production. (Production Part -2) #AnjaniRathore - YouTube

Hello!!!😊 Viewers welcome back to my channel.

So, till now we have read that production function is a technological relationship between the input and output. We also read about production function and functional relationship.

So, the functional relationship between change in output due to change input is studied under two phases or time period, the first one is SHORT RUN and second one is LONG RUN.

So, Short run is defined as a period in which output can be changed by changing only variable factors of production and keeping other factors of production constant

So, generally we take only two inputs (factors of production) in production function for our ease and simplicity

out of those two inputs, one factor is variable (which can we change in short run) and another is fixed (which we cannot change in short run).

Fixed factors cannot be changed means they will remain constant in short run but yes you can change variable factors.

This doesn't happen that you are increasing output abruptly just by increasing variable factor.

you can increase the variable factor but only till the extent of maximum capacity of fixed factor

for example: if my machine maximum capacity is to produce 50 ton but because of some reason i.e. maybe demand is low in the market or I am new in the Business, so, my machine is producing only 20 ton.

Because the maximum capacity is 50 ton, so, by increasing labour i.e. variable factor I can increase my output, doing so, my machine will be better utilised.

but as soon as 50 ton output is reached, now, even by increasing variable factor we cannot increase output as the maximum capacity is already reached.

Long run is defined as a period in which output can be changed by changing all factors of production.

means in long run all factors are variable because you can change all the factors here.

A firm have lot many options in long run. for example: firm can buy a new machine or can buy land for production and building for office e.t.c

One of the important thing is that don't define short run as a period of one year and long run as a period of more than one year.

Always, see it like that if you are able to change all inputs means that is long run and if you are able to change only one factor and not able to change the other factor means then that is short run.

Period is a Functional concept, as it varies from one production house to another, one business to another,one industry to another, one firm to another.

for some firm a period of two year is short run because in that they are not able to change fixed factor and after a period of two year is long run because in that they are able to change both the factors means all factors of production or inputs.

Factors of production are classified as Variable and Fixed factor.

So, Variable factor is defined as a factor which can be changed in short run and they are directly related with output.

As in our example also, machine can produce up to 50 ton but producing only 20 ton and as soon as we increase our variable factor in that example as a result the output will also be increased.

Fixed factor are defined as a factor which cannot be changed in short run they do not change remains fixed irrespective of the level of output.

It doesn't matter output will be increased or decreased or even zero they will always be fixed means constant.

for example: I have purchased a land to setup a factory, land will be always there, means it will not be increased or decreased by itself, it will be fix whether I carry out production or not.

See, if I have only land I cannot carry out production process because I need variable factor i.e. labour, and raw material to carry out the production.

They are not directly related to the level of output as I said they will always be there means fixed, no matter output will be increased or decreased. They will always be constant.

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