Profits, Prices, and Excess Capacity

Abstract

The article discusses excess capacity in the marketplace's supply-demand framework and the prevention of overexpansion in U.S. industries. Although excess capacity is viewed as an inflation control, a "profit squeeze" results from excess capacity, which reduces prices and profits, as well as the incentive to expand. Excess capacity can also be defined from resource use and cyclical viewpoints. Topics include trends in excess capacity, collection of economic intelligence, policy formation, and advice for analyzing excess capacity.