ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Capacity utilisation is a measure of the extent to which the productive capacity of a business is being used. It can be defined as: The percentage of total capacity that is actually being achieved in a given period.

Detailed explanation-2: -Capacity utilization refers to how much of a factory’s production capacity is currently being utilized. The KPI tracks how much of a manufacturing operation’s potential output is being met and includes everything from machinery capacity to available resource utilization.

Detailed explanation-3: -What Is Capacity Utilization Rate? Capacity utilization rate measures the percentage of an organization’s potential output that is actually being realized. The capacity utilization rate of a company or a national economy may be measured in order to provide insight into how well it is reaching its potential.

Detailed explanation-4: -It means that the higher the capacity utilization, the lower the cost per unit, allowing a business to gain an edge over its competitors. Many large companies aim to produce as close to the full capacity rate (100%) as possible.