Cost Of Production and Concept of Revenue — Economics STD 11 Commerce — Question

• A short term (run) is a time period in which a producer cannot change factors of production. Hence in this period all the factors of production such as plant, heavy machinery, building of a factory, etc. remain fixed.
• The producer can increase/decrease production by increasing or decreasing variable factors such as raw material, labour, electricity, etc.
• Moreover, the producer cannot change the size of firm but can increase production by increasing the capacity of factors of production.

Long term (run):

• A long term (run) is a time period in which a producer can change all the factors of production. Hence, in this period all the factors of production such as plant, heavy machinery, building of a factory, etc. are considered variable.
• The producer can increase or decrease these factors of production and hence increase/decrease the production in long term (run).
• The producer can change the size of the firm. By doing so he can change the total production to a large extent in a long term. The firm can also expand its size by using new and modern technology.