Long-Run Vs. Short-Run: Labor In Action

The overall concept of relocating companies to neighboring countries is very common. Along with the continued development of colonization, the concept of import and export continued. Import is defined as "purchase or introduction of products from other countries". The definition of export is as follows. "Products will be shipped to another country for sale (American traditional dictionary)". Today's automobile market follows a similar trend. Many countries have been pointed out that they purchase and purchase foreign cars for various reasons, but many people do not understand that these cars are manufactured and sold directly in their own country.

The boundary between the sprint and the long distance running can not be defined precisely in the stopwatch and can not be defined in the calendar. It depends on specific business. Therefore, short-term and long-term distinctions are more technical. Companies can not change the use of fixed inputs in the short term and enterprises can adjust all production factors over the long term. In a very competitive market, the profit is a red cloak stimulating the cost of the company. If a company profits in a short period of time it has the motivation to extend an existing plant or build a new one. The new company may also start production. When a new company enters the industry to cope with the increased industry interest, it is called entrant.

Imagine how to understand how the short-term interests of highly competitive companies will disappear over the long term as follows. The market is in a long-term equilibrium state, and all companies zero out economic interests and produce production levels. Here, P = MR = MC and P = AC. There is no motivation to enter and leave the market. Assuming that demand for products increases, market prices rise following that. Existing companies in the industry face higher prices than before, so increase production to new levels of production. Here, P = MR = MC.

There is a clear difference between short-term and long-term total supply therapy. In the short term, since the total supply curve depends on the price level of a specific output, the rise in the price level affects the supply of goods and services in the economy, but the long-term aggregate supply is independent It does not affect as it is considered. Price level in the long term. In the long run, economic production capacity is mainly due to the rise in productivity level and expansion of available factor input. Expansion of the available element inputs, so that the long-term total supply curve is perpendicular to the chart, achieved by achieving more companies, bigger better capital stock, and an increase in the number of skilled workers can do.