Fixed and variable factors

Fixed and variable factors of production. Do they hold goods in both the short run and the long run?

Fixed factors: The factors which cannot be readily varied and require comparatively long time to make adjustment in them are called fixed factors.

Example: Capital equipment, building, top management, personnel etc. are fixed factors.

Variable factors: The factors, which can be readily varied with the change in the ouput level, are known as variable factors.

Example: Labour, raw materials and chemicals etc. are variable factors.

Application Of Variable And Fixed Factors In Short And Long Run:

In short run, factors like building, equipment cannot be readily varied. These all are fixed factors. Yet factors like labour, raw material can readily be varied with outp0ut level, which are variable factors. So in the short run, both fixed and variable factors hold good.

But as we can see, in the long run, all the factors even if it is building or equipment can be varied with the expansion of the firm’s plant. So there is no existence of fixed factors in the long run.