The difference between short-run and long-run growth
Short-run growth means the economy produces more output by using spare capacity it already has. Long-run growth means the economy permanently expands its ability to produce more.
Real World
After Covid-19 restrictions lifted in 2021, UK GDP rebounded 7.5% as furloughed workers returned and idle capacity was reused — this was short-run growth. In contrast, South Korea's decades of investment in education and technology from the 1960s onwards permanently raised its productive capacity, representing long-run growth.
Exam Focus
Distinguish the two by asking: does output rise because spare capacity is used, or because productive capacity itself expands? State this explicitly.
Price Elasticity of Demand
PED = % change in quantity demanded ÷ % change in price
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