In the long-run, there is no fixed factor; all factors are variable. The laws of returns to scale explain the relationship between output and the scale of inputs in the long-run when all the inputs are increased in the same proportion.
Assumptions:
(i) All the factors of production (such as land, labour and capital) are variable but organization is fixed.
(ii) There is no change in technology.
(iii) There is perfect competition in the market.
(iv) Outputs or returns are measured in physical quantities.
Three phases of returns to scale:
(i) Increasing returns to scale
(ii) Constant returns to scale
(iii) Diminishing returns to scale.

Bohm - Bawerk defines it as "a Produced means of Production". All capital is wealth but all wealth is not capital.
Characteristics of Capital
i) is a man-made factor.
ii) Capital is mobile between places and persons.
iii) Capital is a passive factor of production.
iv) Capital's supply is elastic.
v) Capital's demand is a derived demand.
vi) Capital is durable.

(i) Price of commodity.
(ii) Price of the other commodity.
(iii) Price of factors.
(iv) Price expectations.
(v) Technology.
(vi) Natural factors
(vii) Discovery of new raw materials.
(viii) Taxes and Subsidies.
(ix) Objective of the firm.

(i) Charles Cobb and Paul Douglas have given a linear homogeneous production function.
(ii) A proportionate increase in the factors leads to a proportionate increase in output.
(iii) There is constant returns to scale with only labour and capital.
(iv) The elasticity of substitution between the factors is one.
Q = AL^{\(\alpha \)}K^{\(\beta \)}
Q = output; A = positive constant; K = Capital; L = Labour, \(\alpha \) + \(\beta \) = 1

Producer's equilibrium happens when there is maximum output with minimum cost ie. optimum combination of the factors of production.
The two conditions to be fulfilled are
1. The iso-cost line must be tangent to iso-quant curve.
2. At the point of tangency, iso-quant must be convex and MRTS_LK must be declining.

3. The producer is in equilibrium at E.
Slope of iso-quant curve = Slope of iso-cost curve.