Term
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Definition
Time period during which at least one factor of production is fixed and cannot be changed by the firm.
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Term
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Definition
| Time period which is long enough so that factors of production can be changed. Most planning takes place in the long run. All inputs are variable. |
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Term
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Definition
Factors of Production which do not change as the output changes.
For Example: rental payments, property taxes, insurance premiums etc. |
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Term
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Definition
Factors of production which vary as the output of the firm changes.
For Example: if a firm wants to increase output to meet higher demand, they can hire more labourers. |
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Term
| Law of diminishing returns |
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Definition
| As more and more units of a variable inputs (such as labour) is added to a fixed input (such as land) the returns of the variable input increases at first , but only up to a point, after which the returns given by the variable inout begins to decrease. |
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