Explain the difference between the “short run” and the “long run”. Be specific.
Short run and long run are two different types of time-based parameters. The short run can be any time period, it can be a week to a month or even a year. In the short run price, wages are sticky, one factor of production is fixed in the short run others are variable. In the short run, the time period is to short to find substitute goods so the demand and supply are inelastic.
The long run time period can span over some period of time depending on the economy and the set of parameters. In the long run price, wages are flexible. All the factor of production is variable. In the long run, costly products can be substituted by cheaper product so the demand, supply is elastic.
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