People often talk about short-run versus long-run consequences of events. For example, in the short run, winning a pie-eating contest may give you a bellyache. Repeatedly win pie-eating tournaments and, in the long run, you will need a bigger car. You may enjoy partying in the short run, but in the long run, your grades will suffer. Short and long runs in economics refer to the completeness of adjustment rather than to time periods per se. Relatively fewer options are available to firms in the short run.

The short run is a period during which the amount of at least one resource is fixed and firms can neither enter nor exit a market.

Because at least one factor (resource) is fixed in the short run and exit is prohibited, firms will face some costs that cannot be avoided (are fixed) even if the firm produces no output at all. In the long run, however, a firm can completely adjust the amounts of all resources and can either enter or leave industries.

The long run is a period of sufficient duration for all feasible resource adjustments to any event to be completed, including entry into and exit from the market.

The specific time intervals required for different firms to achieve long-run adjustment differ markedly. Some firms can liquidate all their assets in days; others may require years. Small restaurants can close within days, but building a chemical plant can take decades. Seven years elapsed between the time General Motors decided to build the Tennessee Saturn plant and when the first car came off the line. Capital requirements and the extent of regulation are only two of many influences on how long it can take to enter or exit an industry.