Short Run and Short Term

Readers Question: what is the difference between short run and short term?

Not much. If there is a difference, the distinction doesn’t matter at A level.

When talking about production, we often refer to the short run and long run.

For example:

  • Diminishing returns occurs in the short run. In the short run, we assume capital is fixed. In the long run, the amount of capital is variable.

We may mention short term factors affecting exchange rates or short term factors affecting economy.

For example, an increase in the money supply may cause a short-term increase in real output. However, in the long-term, an increase in the money supply may cause inflation and therefore diminish the increase in real output.

We wouldn’t really refer to short run factors affecting economy. Though it has effectively the same meaning.

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