Capacity Utilization Rate Law and Legal Definition

Capacity Utilization Rate is the ratio of actual production by business sector factories and other productive establishments in the economy to the potential production of these establishments. This rate indicates if an economy's factories are being used as effectively and as fully as possible. Like the unemployment rate, the capacity utilization rate measures how close an economy is to full employment. And like unemployment, this rate moves up and down over the course of a business cycle.