The distinction between fixed and variable factors is related to two periods the short-run and the long-run. The period of short-run is too short to cause variation in fixed factors. Thus, in the short-run, some factors are fixed, while the others are variable.

The production can be increased only by increasing the quantity of the variable factors or by having additional shifts or by increasing the hours of work. But, in the long-run (also called as planning period of the firm), all the factors are variable, i.e., the quantity of all the factors required can be varied to produce an output ranging from zero to an indefinite quantity.

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All investment options are open including installation of new plant and machinery. In the long run, it is possible for a firm to branch out into new products or new areas or to modernise or reorganise its method of production through invention of new techniques.

The distinction between fixed and variable factors helps us to study the law of variable proportions and the law of returns of scale. These laws of production show the relationship between the factors of production and output in the short-run and long-run respectively.