Cambridge International as and a level Economics Ebook

The time dimension
We live in a world of change. Change is all around us in 
our lives, our work and in the ways in which economies 
function. In order to take change into account, it is oft en 
necessary to specify the time dimension; in other words, 
to assess how over time change can infl uence the concepts 
that economists are seeking to model and explain. Th
is 
can be done very eff ectively in terms of the factors of 
production.
Th
e 
short run
is a time period in which it is possible 
to change only some inputs. Typically it is when labour, 
a variable factor of production, can be increased or 
decreased to change output. So, with all other factors of 
production remaining the same (
ceteris paribus
), a fi rm 
taking on more workers may be able to increase its output.
In the 
long run
, it is possible for all factors of 
production or resources
 
to change.
 
So, in the long run, a 
fi rm may improve the quality and quantity of its capital 
by building a new factory to increase its output. Th
is will 
usually allow it to be more effi
cient since the fi rm has had 
time to evaluate how best this can be done successfully 
and effi
ciently. Th
e 
very long run
is where not only are 
all factors of production variable, but all other key inputs 
are also variable. Th
ese key inputs can include technology, 
government regulations and social considerations.
Very long run: 
time period when all key inputs into 
production are variable.
KEY TERM
It should be clear that it is not possible to put an exact 
timescale on any of these time periods. Just what they are 
likely to be will depend on particular circumstances.