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PEAK-LOAD PRICING - Charging more when its costs more to produce.ppt

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PEAK-LOAD PRICING - Charging more when its costs more to produce.ppt Powered By Docstoc
					   PEAK-LOAD PRICING




Charging more when its costs more to
produce

[Evaluation]
Advantages of Peak-load
Pricing
To producer:
  •    He can earn supernormal profits.
  •    He can tap into the elastic market along
      with the inelastic market situation during
      peak times.
  •    The average costs go down due to
      economies of scale.
To consumers:
  •    They are charged lower prices during off-
      peak times.
  •    They can shift their demand to off-peak
      seasons and thus pay a lower price for the
      same good or service.
Disadvantages of Peak-load
Pricing
 •     If a uniform price is charged for all times,
     consumers usually buying during off-peak
     times would refuse to pay a higher price.
     Thus the producers would lose out on the
     elastic demand market.
 •    The consumers can be exploited by the
     producers during peak periods as the
     demand is inelastic and the consumer has
     no alternative.
Short Run
•    The producer earns supernormal profits in
    the short run though his marginal costs are
    relatively higher as output is high.
Long Run
•    The costs of production could decrease with
    change in technology, inventions etc.
•    The producers would thus earn supernormal
    profits.
Stake holders
•    The government would enjoy higher revenue
    during peak periods.
•    The stakeholders also benefit as they earn higher
    total revenue if they were to sell at a uniform
    price.
•    During peak periods, the producers are the
    gainers while the consumers would lose out.
•    During off-peak periods, the consumers benefit
    while the producers could be the losers.

				
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posted:2/11/2014
language:English
pages:7