Some inputs can be varied flexibly in a relatively short period of time. We conventionally think of labor and raw materials as "variable inputs" in this sense. Other inputs require a commitment over a longer period of time. Capital goods are thought of as "fixed inputs" in this sense. A capital good represents a relatively large expenditure at a particular time, with the expectation that the investment will be repaid -- and any profit paid -- by producing goods and services for sale over the useful life of the capital good. In this sense, a capital investment is a long-term commitment. So capital is thought of as being variable only in the long run, but fixed in the short run.
Thus, we distinguish between the short run and the long run as follows:
In the perspective of the short run, the number and equipment of firms operating in each industry is fixed.
In the perspective of the long run, all inputs are variable and firms can come into existence or cease to exist, so the number of firms is also variable.
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