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lectur5-page37 - Thus most of the firm’s workers may...

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37 37 Present Consumption Consumption within a short period of time, also referred to as short run consumption. “Short run and long run are concepts that have particular meanings in economics, meanings that are often different from every day usage of the terms. In microeconomics, the short run is the time period in which one or more important conditions cannot be changed. A firm may make decisions “in the short run” because its building lease runs for another year or two, or because its workers have a three-year labor contract. Workers may make decisions in the short run because they have a fixed commitment, such as wanting to stay put until children finish high school.
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Unformatted text preview: Thus, most of the firm’s workers may accept a pay cut in the short run, but once their fixed commitments are gone, the long run response may be different. For some firms or individuals the short run may be only a week or a month, while for others the short run may be years. The exact length of the short run depends on the length of the fixed commitments people face in a given situation.” The material above has been excerpted from: Introduction to Economic Principles by Mabry and Ulbrich, McGraw-Hill Book Company, 1989. ISBN: 0-07-044797-7, page 16....
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