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Capacity is the maximum number of participants of each appointment.
For example:
Service Capacity is 10. It means the maximum number of participants the admin can take in a duration is 10 people.
When you set the capacity more than 1 in a duration, you can take multiple bookings at once. Similarly, you also can limit the number of people who can come to the appointment.
Because the number of participants excesses the service Capacity you set.