Steve Bain

What is a Fixed Input in Economics?

A fixed input in economics is associated with the short-run i.e., a period of time over which firms are unable to adjust relatively inflexible factors of production like capital and land. How long this period lasts will be different for different firms, but most firms find that labor is the most flexible input, and so it is considered to be a variable input even in the short-run.

For example, consider a bakery with a fixed-sized oven in the short run. If the demand for baked goods surges unexpectedly, the bakery can hire additional staff (variable input) to meet the demand. However, the fixed size of the oven restricts the bakery from an immediate expansion. Short-run decisions are thus intricately tied to optimizing the utilization of existing resources under the constraints of fixed inputs.

The microeconomic models of firms and industries in the short-run are typically built with only two inputs into the production process i.e., labor and capital. Labor is the only variable input in these models, capital is always held to be a fixed input.

Are Machines a Fixed Input?

Yes, machines are a type of capital item and that means that they are regarded as a fixed input but, as mentioned above, only in the short-run. In the long-run all inputs are variable. The question again arises about how long the long-run is, and there is no clear answer, it is simply that period of time that is necessary for all inputs to become variable.

For some industries the long-run is relatively short. A farmer, for example, can increase his/her capital quite quickly e.g., by buying a new tractor. In other industries e.g., offshore oil extraction, it may take decades to get planning permission and to pass all necessary regulations before a new oil rig can be built and put in place.

The Long-Run; Fixed Inputs vs Variable Inputs

In the long run, enterprises are endowed with a heightened degree of adaptability. This period is characterized by the malleability of all factors of production, including labor, capital, raw materials, and technology. In essence, there are no fixed inputs in the long-run.

The absence of fixed inputs in the long run allows firms to strategically mold their operations to fully align with market dynamics and strategic objectives.

In practical terms, a long-run decision might involve a manufacturing firm responding to an increased demand for electric cars. Here, the company can seamlessly make substantial changes, such as expanding production lines, investing in new technologies, and adjusting the scale of operations by building new manufacturing plants.

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