In Economics What Is Underutilization?

Underutilization is the state of not being used enough or not used to full potential.

What is the economic definition of underutilization?

Underutilization means a situation of not utilizing machines or resources to the fullest capacity or the production capacity. Under-utilization of resources have an impact on profits of the company and hence are a matter of concern for the management.

What causes underutilization in economics?

A shortage of inputs like raw materials, power, transport facilities, labour, etc., may cause underutilisation of capacity. ... The shortage of foreign exchange for the import companies, raw materials and spare parts is undoubtedly the most important single factor limiting output in industries.