Capacity

• Is the maximum amount of output achievable if all resources are fully utilised?
• In the long run capacity can be increased by acquiring more resources
• In the long run capacity can be reduced by downsizing resources
• A business will aim to match capacity to demand
• Relatively difficult to increase capacity
• Capacity

  • is capacity sufficient to meet demand or is it too big?
  • should the firm look to increase or decrease capacity?
  • can demand be altered to make greater use of capacity?