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Catracho Catracho
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5 years ago
let's discuss the difference between long-run and short-run. If you were a business owner, how would you apply the principles in this chapter and the previous chapter to make decisions about your business? You will need to define short-run and long-run from your own knowledge, explain the difference, and then determine what decisions you would have to make in time frames. You may use your Fortune 500 company if you like
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5 years ago
Short-run is the period of time that is too short to vary all inputs, while long-run is the period of time in which all inputs can be varied. In other words, short runs are changes that you can make right away, or with a little to no wait to create more profit, long runs are changes in the business that will affect everything about the business from the location to prices of the goods that you are selling.

Let's pretend you're running a fast-food restaurant in the city center. Bringing more tables to the restaurant, for example is a short-run; the tables will allow the restaurant to sit more customers each day, which translates to more potential revenue. Another short-run could be hiring more employees; the quicker the food is prepared and delivered to the customer's table, the faster that table will be available for the next customers, which also translates into more revenue.

A long-run for the restaurant can be an expansion of the business (via franchising) or maybe a new building. Given this large change, it will take more time to implement, and as an owner, you will need capital and the budget to implement these ideas. This will certainly affect both the money coming in the restaurant and the money going out. Another long-run can be upgrading the kitchen equipment to equipment to expedite the cooking process without losing the quality. Kitchen equipment is very expensive, and given the building size, the owner may need to expand the area OR purchase equipment that fits the area. A change of this kind cannot be made without a large budget to do it.
 
If increasing profits by small margins is the business owner's goal (for example, to curb inflation costs or a temporary influx of new customers), the short-run scenario is ideal. That is, it's best to hire more staff and bring in more tables. However, if the influx of customers continues to grow beyond capacity, it's probably best to expand the building size or begin to franchise the business in other locations throughout the city.
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