A restaurant operates at full capacity during dinner times and experiences unused capacities during breakfast and lunch times. It should plan for capacity based on the demand levels at dinner times.
Demand refers to the number of products that is being required by the consumers to buy. Supply refers to the number of products that is made available to the consumers. The prices of the products and the demand of any product or services determines the supply of the product. These three terms are inter related with each other since one affects the other.
In the given example, it is given that the operation of a restaurant utilizes its full capacity during the time of dinner. They are left unused during the time of lunch and breakfast. Thus the restaurant must plan for the capacity depending on the levels of demand that exists at the dinner time.
