Short vs Long Run and Production Factors
Economists split production into two time periods that affect business decisions. Short run means at least one factor of production (like factory space) is fixed and can't be changed. Long run means businesses can adjust all their resources.
Several key factors determine how much an economy can produce. The quantity of available resources - land, labour, capital, and enterprise - can increase through discoveries like oil reserves or policies like increased immigration.
Resource utilisation matters too - an economy works best when operating at full capacity on its production possibility boundary. The quality of factors also counts; better education improves labour quality whilst new technology enhances machinery efficiency.
Specialisation and scale of production both boost output. When workers focus on specific tasks, their skills improve dramatically. Similarly, operating at the most efficient scale helps firms maximise their productive potential.
💡 Key Insight: It's not just about having resources - it's about using them effectively and combining them in the right ways.