Question

Pls explain, “(why) the producer should be charging a peak-period fee” if necessary pls create an example and also plot the graphıics.

Answer 1

Producers like utility companies must charge peak period fee or peak pricing mechanism when demand is certainly higher in that period of year.

This isbdone as producers incurr higher cost of production and distribution. If peak period pricing is not charged then demand outsrips supply causing brownout and also lead to congestion for customers which negatively impacts usage experience and leads to faults.

Thus to create demand supply match equilibrium and avoid lossess for producer, the peak pricing must be levied.

Thus if peak price tax is charged then it results in lower consumption anf thus deadweight losses as resembled in diagram as Triangle ABC which is excess burden of tax.

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