The short run is defined not by a fixed timeframe, but by the condition in which at least one input in the production process remains fixed. The input whose quantity cannot be changed is called the fixed input. The input whose quantity can be changed is called the variable input. When all inputs can be changed, the time frame becomes the long run.

Typically, the fixed input is capital, such as machinery or the physical size of a production facility, which cannot be easily or quickly changed. In contrast, labor is considered as the variable input. The quantity of labor is more flexible and can be readily adjusted to increase or decrease production levels.

Capital, being fixed, represents the firm's capacity constraint. Labor, being variable, allows the firm to adjust its production intensity within this constraint. For example, consider a lemonade stand. The stand itself is the fixed input, representing the business's physical capacity. The number of workers can be changed, which is a variable input. Production can be measured in terms of the number of glasses of lemonade made and can be changed by varying the number of labor employed.