Final answer:
Excess capacity, spare capacity, overcapacity, and surplus capacity are terms used in economics to describe a situation where the quantity produced is greater than the quantity demanded at the existing price. This can lead to a shortage and inefficiencies for businesses.
Step-by-step explanation:
In economics, the terms excess capacity, spare capacity, overcapacity, and surplus capacity are used to characterize circumstances in which the quantity produced exceeds the quantity demanded at the current price. When this happens, there may be a shortage—also referred to as excess demand—because the quantity required exceeds the quantity supplied. There is underutilized or under-utilized production capacity in this case.
For example, let's say a company has the capacity to produce 1,000 units of a product, but the current demand is only for 800 units. This means there is excess capacity of 200 units.
Excess capacity can lead to inefficiencies and potential losses for businesses, as they are not fully utilizing their resources. It can also have an impact on the overall economy.
Correct question:
Explain the following: excess capacity spare capacity overcapacity surplus capacity