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Volume and capacity are both volumes.

Capacity is the volume inside a container (ie how much space there is in it, or alternatively expressed as how much it can hold when full) whereas the volume of a container is the amount of space it itself takes up.

For example, a crate that is made from 1 cm thick wood that is 100cm x 50cm x 50cm on the outside has:

volume = 100cm x 50cm x 50cm = 250000 cm3 = 250 litres

capacity = 98cm x 48cm x 48cm = 225792 cm3 ≈ 226 litres

(Each wall is 1 cm think, so the inside length is 100cm - 1cm (for one wall) - 1 cm (for the wall at the other end) = 100cm - 2cm = 98cm, etc)

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