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Example of Low Capacity Utilization Due to Insufficient Demand
Consider a firm that has the machinery and equipment to produce more goods simply by hiring additional employees. However, the firm chooses not to increase production because there is not enough demand in the market to sell the extra output. This scenario, where a firm's production is held back by a lack of demand rather than by its physical or technological limits, is an instance of low capacity utilization.
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Ch.3 Aggregate demand and the multiplier model - The Economy 2.0 Macroeconomics @ CORE Econ
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Learn After
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