See the below image for the Short run economic growth diagram. Short run – where one factor of production (e.g. capital) is fixed. This is a time period of fewer than six months. Long run – where all factors of production of a firm are variable (e.g. a firm can build a bigger factory) A time period of greater than six months/one year.
Short run refers to a production planning arrangement wherein at least one production input remains fixed while the rest are variable. It is a brief period within which a business must react to changes in supply or demand. Sometimes due to sudden or seasonal demand, some inputs, but not all, need to be changed to achieve the desired output.
Short-run economic policy attempts to shift the production possibilities curve outward. When an economy moves from a point inside its production possibilities curve to a point on the curve, potential GDP has increased.
Short run economic growth image
