In the case of the call centre, a long-run change might be the replacement
of the firm’s existing telephone exchange with a better, digital exchange
that can process a higher volume of calls. Note here that the firm has
added more and better capital, with no necessary change to its variable
factors which, in this case, are workers, phones, and workstations.
The Very Long Run
Unlike the short run and the long run, the very long run is a period of
time in which the technological possibilities available to a firm will
change. Modern industrial societies are characterized by continually
changing technologies that lead to new and improved products and
production methods.
The very long run is the length of time over which all the firm’s factors of production and its
technology can be varied.For our call centre, a very long-run change might be the development
over time of an entirely automated service system, replacing much of the
firm’s traditional labour and capital.
For the remainder of this chapter, we consider costs and production in the
short run. We continue with our simplified situation in which there are
only two factors of production—labour and capital. We will assume that
capital is the fixed factor whereas labour is the variable factor. In the next
chapter, we explore the firm’s decisions in the long run and the very long
run.