Question

What is meant by short-run supply?

   What is meant by short-run supply?

Intermediate Microeconomics

Intermediate Microeconomics

Robert W. Clower,… 1st Edition

Chapter 9, Problem 8

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Solved by Expert Daniel Cisneros

10/02/2019

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What is meant by short-run supply?

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Key Concepts

Marginal Cost and Production Decisions

In the short run, a firm's decision on how much to produce is largely determined by comparing the marginal cost of producing an additional unit to the market price. The short-run supply curve is typically derived from the portion of the marginal cost curve that lies above the average variable cost, ensuring that production is only sustained when it is profitable.

Fixed and Variable Inputs

The concept of fixed and variable inputs is central to understanding short-run supply. Fixed inputs, such as machinery or plant size, cannot be altered quickly, whereas variable inputs, like labor or raw materials, can be adjusted in the short run. This distinction explains why firms have limited flexibility in their production levels over short periods.

Short-run Supply

Short-run supply refers to the amount of a good or service that a firm is willing and able to produce and sell when some inputs are fixed. In the short run, a firm cannot change all of its production inputs, so its supply decisions are based on the variable factors available while capital and other long-term resources remain constant.

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