Is Owen's decision about hiring a fourth driver a short-run or long-run decision?Owen runs a delivery business and currently employs three drivers.  He owns three vans that employees use to make...

Is Owen's decision about hiring a fourth driver a short-run or long-run decision?

Owen runs a delivery business and currently employs three drivers.  He owns three vans that employees use to make delivers, but he is considering hiring a fourth driver.  He will not purchase another van until his business becomes more well-established, but he has enough customers to justify hiring the extra drver for more shifts.

Asked on by Mizdee

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pohnpei397 | College Teacher | (Level 3) Distinguished Educator

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If the decision about hiring the fourth driver will be made without purchasing another van, it is a decision that is being made in the short run.  In economic terms, the short run is a time frame in which some of the factors are fixed and some are variable.  In the long run, all factors are variable.  In the long run, for example, Owen can change the number of vans that he owns.  If the only factors of production for Owen's firm are vans and employees, then a situation where the vans are held constant and the number of employees changes is a short-run situation.  It is a short-run situation because the number of vans is not allowed to change.  If it were a long-run scenario, the number of vans could change.

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