1. presence of unused capacity together with insufficient raw materials or skilled labor. When idle capacity exists, a firm can take on an incremental order without increasing the fixed costs.

2. economic situation in which the market will not absorb all of the maximum possible output at a price exceeding the variable cost of production. See also CAPACITY.

3. capacity that is potentially available but not currently being used, perhaps due to market pressures from competition, distribution constraints, or management policy (such as union contract laws, holidays, overtime rules); also called excess capacity. On the other hand, increased idle capacity may represent the rewards and evidence of improved productivity and efficiencies by operations.