Question

Capital is immobile in the short run. Explain.

Answer 1

The statement “capital is immobile in the short run” refers to physical capital assets that cannot be easily, rapidly, or cheaply relocated to a new location or adapted to a different industry over a short period of time. This immobility occurs because big capital assets, such as production buildings, heavy machinery, and industrial facilities, are both highly specialised (sunk capital) and physically massive. In the short term, a company cannot readily convert a specialised printing press to produce electronics if market demand changes, nor can it profitably relocate a massive blast furnace to another state.