In the context of SEGOA (an acronym for the five factors of production: Society, Entrepreneurship, Government, Ownership, and Ability), short-term costs refer to expenses that a business incurs in the immediate future, usually within a year or less. Long-run costs, on the other hand, refer to expenses that a business incurs over an extended period, usually more than a year.
Here are some practical examples of short-term and long-run costs in SEGOA:
Short-term costs:
- Paying rent for a retail store
- Purchasing inventory for a seasonal sale
- Hiring temporary staff for a busy period
- Paying for a one-time marketing campaign
In these examples, the expenses are incurred in the immediate future and have a direct impact on the business's current operations. They are considered short-term costs because they are typically paid within a year or less.
Long-run costs:
- Investing in new technology to improve production efficiency
- Purchasing a new retail store location
- Developing a new product line
- Training employees to acquire new skills
In these examples, the expenses are incurred over an extended period and have a direct impact on the business's future operations. They are considered long-run costs because they typically take more than a year to pay off and have a long-term impact on the business's success.
In summary, short-term costs are expenses incurred in the immediate future and have a direct impact on the business's current operations. Long-run costs, on the other hand, are expenses incurred over an extended period and have a direct impact on the business's future operations.