Capacity is the amount of input resources available

to produce output over a period of time.

Such resources are machinery, man power, capital,
efficiency etc
Maximum rate of output per unit of time: 1000 TV
sets to be delivered within 30mins from one area to
other. We need a specific quantity of vehicles so
that it can delivered within 30mins. We can’t use
only one vehicle as time period can exceed.
Units of resource availability. As on Mondays, there
are many patients as many hosp are closed on
Sundays, so the hosp needs sufficient resource i.e.
beds or etc as there are many patients admitted.
Economies of scales refers to when the capacity of
output produced increases and the cost decreases.
Walmart (WMT) is the largest US supplier of
groceries, and the largest US general retailer. They
can buy in such enormous bulk, and force suppliers
to accept such low prices, so they can sell at low
prices to customers. 
Diseconomies of scales refers when the capacity of
output produced increases and the cost increases
too. When the production of a company increases,
the main impact is seen on the machinery involved
in the production process and labor performing the
work. The overproduction might wear machinery
which can cause accidents and damage to
machinery. The insurance cost and installation of
new machinery increase the cost of production and
results in diseconomies of scale.
Theoretical capacity: is the level of manufacturer’s
production if all its equipments and operations are
performed continuously at their optimum
efficiency. It is not realistic due to repairs,
maintenance, holidays, power failures, labor
shortages etc which ll result into downtime.(they
don’t take into account)
Effective capacity/practical: is the level of
manufacturer’s production which is less than
theoretical capacity in terms of machine hours,
pounds etc.
For example, if a manufacturer has theoretical
capacity of 2,080 hours based on 8 hours per day
for 5 days per week for 52 weeks, its practical
capacity might be only 1,860 hours. The 220 hour
difference could be associated with repairs,
maintenance, setups, plant shutdowns for holidays,
and other downtime. Hence, a manufacturer's
practical capacity is more realistic than its
theoretical capacity.