Question

During a period of increased demand for the firm's produce in the market, the firm took a bank overdraft, bought raw materials with that amount and increased production this is a case of:

• A. a short run adjustment
• B. a long run adjustment
• C. a financial adjustment
• D. none of the above

Answer 1

The correct option is A a short run adjustment

Increase in raw material is change in the variable factor, while there is at least on fixed factor, taken up to increase production so as to fulfilling the increasing demand, which is a short period adjustment.