Difference Between Short Run and Long Run Production Function

A short-run production function refers to that period of time, in which the installation of new plant and machinery to increase the production level is not possible. On the other hand, the Long-run production function is one in which the firm has got sufficient time to instal new machinery or capital equipment, instead of increasing the labour units.

The production function can be described as the operational relationship between the inputs and outputs, in the sense that the maximum amount of finished goods that can be produced with the given factors of production, under a particular state of technical knowledge. There are two kinds of the production function, short run production function and long run production function.

The article presents you all the differences between short run and long run production function, take a read.

Content: Short Run Production Function Vs Long Run Production Function

1. Comparison Chart
2. Definition
3. Key Differences
4. Conclusion

Comparison Chart

Basis for Comparion	Short-run Production Function	Long-run Production Function
Meaning	Short run production function alludes to the time period, in which at least one factor of production is fixed.	Long run production function connotes the time period, in which all the factors of production are variable.
Law	Law of variable proportion	Law of returns to scale
Scale of production	No change in scale of production.	Change in scale of production.
Factor-ratio	Changes	Does not change.
Entry and Exit	There are barriers to entry and the firms can shut down but cannot fully exit.	Firms are free to enter and exit.

Definition of Short Run Production Function

The short run production function is one in which at least is one factor of production is thought to be fixed in supply, i.e. it cannot be increased or decreased, and the rest of the factors are variable in nature.

In general, the firm’s capital inputs are assumed as fixed, and the production level can be changed by changing the quantity of other inputs such as labour, raw material, capital and so on. Therefore, it is quite difficult for the firm to change the capital equipment, to increase the output produced, among all factors of production.

In such circumstances, the law of variable proportion or laws of returns to variable input operates, which states the consequences when extra units of a variable input are combined with a fixed input. In short run, increasing returns are due to the indivisibility of factors and specialisation, whereas diminishing returns is due to the perfect elasticity of substitution of factors.

Definition of Long Run Production Function

Long run production function refers to that time period in which all the inputs of the firm are variable. It can operate at various activity levels because the firm can change and adjust all the factors of production and level of output produced according to the business environment. So, the firm has the flexibility of switching between two scales.

In such a condition, the law of returns to scale operates which discusses, in what way, the output varies with the change in production level, i.e. the relationship between the activity level and the quantities of output. The increasing returns to scale is due to the economies of scale and decreasing returns to scale is due to the diseconomies of scale.

Conclusion

To sum up, the production function is nothing but a mathematical presentation of technological input-output relationship.

For any production function, short run simply means a shorter time period than the long run. So, for different processes, the definition of the long run and short run varies, and so one cannot indicate the two time periods in days, months or years. These can only be understood by looking whether all the inputs are variable or not.