A Note on the Short Run Expansion Path for the Firm

11 Pages Posted: 18 Oct 2004

See all articles by Clifton T. Jones

Clifton T. Jones

Stephen F. Austin State University - Department of Economics and Finance

Mark A. Thompson

Stephen F. Austin State University - Department of Economics and Finance

Date Written: October 2004

Abstract

There is some confusion about the nature of the short run expansion path for the firm as presented in many intermediate microeconomics textbooks. The traditional view is that the short run expansion path (SREP) is a horizontal line since capital is fixed. However, this approach ignores the firm's ability to use less than (but not more than) the amount of capital it is stuck with in the short run. We show that the traditional horizontal SREP is still valid when one allows the firm to reduce its capital for output reductions in the short run.

JEL Classification: A2, D2

Suggested Citation

Jones, Clifton T. and Thompson, Mark A., A Note on the Short Run Expansion Path for the Firm (October 2004). Available at SSRN: https://ssrn.com/abstract=605521 or http://dx.doi.org/10.2139/ssrn.605521

Clifton T. Jones (Contact Author)

Stephen F. Austin State University - Department of Economics and Finance ( email )

Box 13009, SFA Station
Nacogdoches, TX 75962
United States
936-468-4301 (Phone)
936-468-1447 (Fax)

Mark A. Thompson

Stephen F. Austin State University - Department of Economics and Finance ( email )

Box 13009, SFA Station
Nacogdoches, TX 75962
United States
(936) 468-4301 (Phone)
(936) 468-1447 (Fax)

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