Over-Capacity
Production capacity exceeding market demand.
Formula
Capacity Utilisation (%) = (Actual Output ÷ Maximum Capacity) × 100
Real World
During the 2020 pandemic, Boeing faced severe over-capacity as airlines cancelled orders, leaving its factories producing far fewer planes than they were built to handle.
Exam Focus
Always link over-capacity to rising unit fixed costs — examiners reward this connection in 'analyse' questions.
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