Is capital a fixed factor or a variable factor
Dear Student,
In short run, capital is a fixed factor and not a variable factor because in short run factors like capital, machinery etc are held constant and variable factors like labour, power etc changes as per the level of output generated. So the factor which is held constant comes under the name Fixed factor.
While in long run, nothing is held constant not even capital. So every cost utilised in generating or producing a product comes under variable factors. The fixed factor in the short run becomes a variable factor in the long run because in the long run cost of the factors are not constant and changes with the level of output.
Regards
In short run, capital is a fixed factor and not a variable factor because in short run factors like capital, machinery etc are held constant and variable factors like labour, power etc changes as per the level of output generated. So the factor which is held constant comes under the name Fixed factor.
While in long run, nothing is held constant not even capital. So every cost utilised in generating or producing a product comes under variable factors. The fixed factor in the short run becomes a variable factor in the long run because in the long run cost of the factors are not constant and changes with the level of output.
Regards