what is excess capacity 
excess capacity is a condition that occurs when demand for a product is less than the amount of product that a business could potentially supply to the market when a firm is producing at a lower scale of output than it has been designed for it creates excess capacity the term excess capacity is generally used in manufacturing if you see idle workers at a production plant it could imply that the facility has excess capacity however excess capacity can also apply to the service sector in the restaurant industry for example there are establishments that chronically have empty tables along with a staff that appears unproductive this inefficiency indicates that the venue can accommodate more guests but that the demand for that restaurant is not equal to its capacity 