Question

How do different prices impact production in short and long run?

Answer 1

In the short run there are both fixed and variable cost. In the long run there are no fixed costs.

Answer 2

In the short run, production is impacted by fixed factors and variables that affect production costs1. In contrast, in the long run, all factors of production and costs are variable, and firms can adjust all costs2. In the short run, changes in prices can lead to changes in production levels, but in the long run, firms can adjust their production levels to changes in prices2. The long-run movements in prices are more muted and quantity adjusts more easily because supply and demand are more elastic in the long run3. In the long run, if the demand for a product or service is high, the limited supply will cause the price to be high and remain high4