Short Run

Loading the player...

DEFINITION of 'Short Run'

In economics, it is the concept that within a certain period of time, in the future, at least one input is fixed while others are variable. The short run is not a definite period of time, but rather varies based on the length of the firm's contracts. For example, a firm may have entered into lease contracts which fix the amount of rent over the next month, year or several years. Or the firm may have wage contracts with certain workers which cannot be changed until the contract renewal.

BREAKING DOWN 'Short Run'

In the analysis of short run versus long run costs, it is important to understand the behavior of the firms. In certain situations, it may be preferable to keep operating an unprofitable firm over the short run if this helps to partially offset costs that are fixed. In the long run, however, an unprofitable firm will be able to terminate its leases and wage agreements and shut down operations.

RELATED TERMS
  1. Marginal Cost Of Production

    The change in total cost that comes from making or producing ...
  2. Long Run

    A period of time in which all factors of production and costs ...
  3. Long-Run Average Total Cost - LRATC

    A business metric that represents the average cost per unit of ...
  4. Economics

    A social science that studies how individuals, governments, firms ...
  5. Green Economics

    Green economic theories encompass a wide range of ideas all dealing ...
  6. Environmental Economics

    An area of economics that studies the economic impact of environmental ...
Related Articles
  1. Economics

    What Does Short Run Mean?

    Short run is the concept that for a business, at least one factor of production is fixed while others are variable.
  2. Economics

    Economics Basics

    Learn economics principles such as the relationship of supply and demand, elasticity, utility, and more!
  3. Economics

    Economist Guide: 5 Lessons Milton Friedman Teaches Us

    Find out what can still be learned from the late economist Milton Friedman, a Nobel prize winner and champion of free market economics.
  4. Economics

    Economist Guide: 3 Lessons Karl Marx Teaches Us

    Read about three lessons that modern economic thinkers can learn from German philosopher Karl Marx, the founding father of communism.
  5. Fundamental Analysis

    The 3 Best Investments When Bull Markets Slow Down

    Find out why no bull market lasts forever, and why investors should shift their assets away from growth and toward dividends when stocks slow down.
  6. Economics

    Industries That Thrive On Recession

    Recessions are not equally hard on everyone. In fact, there are some industries that even flourish amid the adversity.
  7. Economics

    Economist Guide: 3 Lessons Adam Smith Teaches Us

    Learn three critical lessons about economics from 18th century philosopher Adam Smith, considered by many to be the father of economics.
  8. Fundamental Analysis

    How Globalization Affects Developed Countries

    The increase in communications technology has companies competing in a global market.
  9. Term

    What's the Economy?

    The economy is the production and consumption activities that determine how scarce resources are allocated in an area.
  10. Markets

    What Saudi-Iranian Tensions Mean for Oil Prices

    The recent break in diplomatic relations between Saudi Arabia and Iran adds complications to the already chaotic environment of Middle East geopolitics. 
RELATED FAQS
  1. What's the difference between microeconomics and macroeconomics?

    Microeconomics is generally the study of individuals and business decisions, macroeconomics looks at higher up country and ... Read Full Answer >>
  2. How do you make working capital adjustments in transfer pricing?

    Transfer pricing refers to prices that a multinational company or group charges a second party operating in a different tax ... Read Full Answer >>
  3. What is the utility function and how is it calculated?

    In economics, utility function is an important concept that measures preferences over a set of goods and services. Utility ... Read Full Answer >>
  4. What does marginal utility tell us about consumer choice?

    In microeconomics, utility represents a way to relate the amount of goods consumed to the amount of happiness or satisfaction ... Read Full Answer >>
  5. What is the difference between JIT (just in time) and CMI (customer managed inventory)?

    Just-in-time (JIT) inventory management focuses solely on the need to replenish inventory only when it is required, reducing ... Read Full Answer >>
  6. What are some examples of Apple and Google's best-selling product lines?

    There are many good examples of product lines in the technology sector from some of the largest companies in the world, such ... Read Full Answer >>
Hot Definitions
  1. Harry Potter Stock Index

    A collection of stocks from companies related to the "Harry Potter" series franchise. Created by StockPickr, this index seeks ...
  2. Liquidation Margin

    Liquidation margin refers to the value of all of the equity positions in a margin account. If an investor or trader holds ...
  3. Black Swan

    An event or occurrence that deviates beyond what is normally expected of a situation and that would be extremely difficult ...
  4. Inverted Yield Curve

    An interest rate environment in which long-term debt instruments have a lower yield than short-term debt instruments of the ...
  5. Socially Responsible Investment - SRI

    An investment that is considered socially responsible because of the nature of the business the company conducts. Common ...
Trading Center