Why is the law of diminishing returns considered a short-run phenomenon?
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In economics the short run and the long run are not defined by an arbitrary amount of time. Instead the short run is the period when at least one factor of production is fixed and cannot be changed. Similarly the long run period is the period when all factors of production are variable.
Having said that, the law of diminishing returns arises in the short run because of the at least one fixed factors of production. In the short run the size of a factory, the number of PC's in a office, the area on a agricultural field and so on are fixed.
As we move to the long run any factor of production can be adjusted and diminishing returns do not have to kick in because you can always adjust them to your needs.
Having said that, the law of diminishing returns arises in the short run because of the at least one fixed factors of production. In the short run the size of a factory, the number of PC's in a office, the area on a agricultural field and so on are fixed.
As we move to the long run any factor of production can be adjusted and diminishing returns do not have to kick in because you can always adjust them to your needs.
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