We can describe inputs as either fixed or variable.

Fixed inputs are those that can’t easily be increased or decreased in a short period of time. In the pizza

example, the building is a fixed input. The restaurant owner signs a lease and is stuck in the building until the

lease expires. Fixed inputs define the firm’s maximum output capacity. This is analogous to the potential real

GDP shown by society’s production possibilities curve, i.e., the maximum quantities of outputs a society can

produce at a given time with its available resources.

Variable inputs are those that can easily be increased or decreased in a short period of time. The pizzaiolo can

order more ingredients with a phone call, so ingredients would be variable inputs. The owner could hire a new

person to work the counter pretty quickly as well.

Economists often use a short-hand form for the production function:

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7.2 • Production in the Short Run 163
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