When demand for a firm\'s product increases, the firm can take a number of steps

Question

When demand for a firm's product increases, the firm can take a number of steps to increase quantities supplied to the market. Some are listed below. Rank them by how quickly the firm can implement them. Explain your ranking. Which actions are short run and which are long run?
a. Begin a second product shift by hiring more workers.
b. Build a second production line in the existing plant.
c. Buy more materials and increase the rate of production per day.
d. Deplete product inventories.
e. Build a second manufacturing plan.

Explanation / Answer

Ranking:

(1) Deplete product inventories (Short run) : this is the most speedy thing which the firm can do.

(2) Buy more materials and increase the rate of production per day. (Short run). Increasing production per day will require only adding some raw material and producing more.

(3) Begin a second product shift by hiring more workers.(short run): Hiring workers (skilled) may take some time.

(4) Build a second production line in the existing plant. (Long run) this may require planning and buying more machines.

(5) Build a second manufacturing plan. (long run): This will require more time to build another plant.

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