What is the fundamental distinction between design capacity and effective capacity? Provide a brief example.

Design capacity is the theoretical maximum output of a system in a given period under ideal conditions. Effective capacity, on the other hand, is the capacity that a firm expects to achieve given the current operating constraints. Effective capacity is often lower than design capacity because the facility may have been designed for an earlier version of the product or a different product mix than is currently being produced. As an example, a restaurant might have 100 seats, but it only opens up 60 every night because it cannot find enough qualified servers.