Long Run versus Short Run

A question I am often asked is "How long is the short run? Is it 6 months, is it a year?"
When I am asked that question, I know that this pupil is struggling with the concept. The short run is not a definite period of time for all companies.

We are not talking about the 100m and the 10,000m

The Short Run 

The short run is a time period in which at least one factor of production is fixed and cannot be changed, for some firms that's an hour, and for others it can be ten years or more.

The Long Run

The long run is a time period sufficiently long that all factors of production are changeable, nothing is fixed.

What determines the length of the short run

Well this depends on the type of business and how long you sign contracts for. If you sign a rental agreement for land for 6 months, that factor of production land is fixed for 6 months and cannot be changed, assuming you can change everything else in a shorter time, we would say that the short run is 6 months. The same goes for employment contracts (labour) or premises rental agreements (capital).


The video below explains the short run nicely in 82 seconds.