Productive capacity
Definition. Productive capacity is the maximum level of output an economy can sustainably produce when its factors of production are fully and efficiently employed. It is determined by the quantity and quality of resources such as labour, capital, land, and the state of technology.
An increase in productive capacity is shown by an outward shift of the production possibility curve or a rightward shift of long run aggregate supply, and represents potential rather than actual economic growth.
This term belongs to Economic Growth in A Level Economics. Read the full chapter for the diagrams, worked examples and exam technique.
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