The Short Run versus long Run

- Short-run:

• Period of time in which the quantities of one or more production factors cannot be changed.
• These inputs are called as fixed inputs.

- Long-run

• Amount of time required to make the entire production inputs variable.
  
  
  
  Observations:

 1)  With the additional workers, output (Q) increases, reaches the maximum limit, and then decreases.

  2) The average product of labor (or AP), or output per worker, increases 1^st and then decreases.


3) The marginal product of labor (or MP), or output of additional worker, increases quickly initially and then decreases and becomes negative.







Observations:

- When MP = 0, TP is at the maximum

- When MP > AP, AP is gets increased

- When MP < AP, AP  is gets decreased

- When MP = AP, AP is at the maximum

AP = slope of line from the origin to a point on TP, lines b, and c.

 MP = slope of a tangent to any point on the TP line, lines a and c.