What is the relationship between capacity and demand?

The relationship between capacity and demand is fundamentally interdependent. When considering the utilization of scarce resources, it is essential to balance both capacity and demand effectively. Capacity refers to the maximum level of output that a service can deliver, while demand represents the actual need for that service from users or stakeholders.

Option B correctly highlights that both capacity and demand must be considered together. By understanding and analyzing demand, organizations can adjust their capacity accordingly to meet the expectations of their customers. This alignment is critical for optimizing resource use, ensuring that services are delivered effectively, and avoiding overuse or underuse of available resources.

Effectively managing this relationship allows organizations to identify potential gaps and opportunities for improvements in service delivery. It assists in making informed decisions regarding investments in resources, personnel, and technology, ensuring that the services provided meet the needs and demands of stakeholders without overextending the organization's capabilities or exhausting its resources.