Over-Capacity
Production capacity exceeding market demand.
Formula
Capacity Utilisation (%) = (Actual Output ÷ Maximum Capacity) × 100
Real World
UK steel producer British Steel faced severe over-capacity after 2016 as demand fell post-Brexit uncertainty, leaving blast furnaces running well below capacity and driving up cost per tonne.
Exam Focus
Show you understand that over-capacity raises fixed cost per unit — calculate capacity utilisation to anchor quantitative answers.
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