Two main concepts of dimensions of change in economics: short -run and long -run . Both concepts do not refer to a specific duration of time but to the nature of changes in the use of factors of production.
The main principle guiding short-run and long-run concepts is that in the short run, companies face both variable (usually labor) and fixed (usually capital) costs. In contrast, in the long run, all inputs are variable.
Understand short term and long term
The short run is a period of time during which a company can change only a few inputs. Usually the variable is labor. The use of labor can be increased or reduced according to changes in output. So, with all other factors of production remaining the same (ceteris paribus), a firm that takes on more workers may be able to increase its output.
Although the number of workers can be reduced/increased, rents, contracts and wage agreements are fixed in the short term. This limits a company’s ability to adjust production or wages to maintain profit levels.
In contrast, in the long run, all factors of production or resources are variable. So, in the long term, a company can not only increase/reduce the number of workers, but can also increase the quality and quantity of its capital by building new factories to increase its output. Building new factories allows companies to become more efficient. As a result, costs rise and fall according to production quantities.
For example, metal mining companies were hit hard by the global metals crash. Despite lower prices, these companies continue to increase production, even though it should be reduced. This increase in production cannot be separated from the investments they made several years earlier, which were made when metal prices were still high.
So, even though in the future they will not build any more production facilities, in the short term they cannot stop production because it could result in cost overruns. As a result, they inevitably have to bear large losses in the short term.
In general, over the long term, companies in capital-intensive industries, such as mining, have time to expand or shrink operations in response to changes in demand. But in the short term, they cannot change production to respond to changes in demand.