I recently had the electric company install a device to turn off my air conditioner for brief periods during time of excessive heat. They pay me $8 a month for permission to do that. Why would a firm pay me to demand less of their product?
What will be an ideal response?
During the hottest days they need to generate much more electricity than most of the time during the year. It would be costly to buy the capital equipment needed for those times if it would be idle the rest of the year. By convincing some to not use as much in those high demand days they can have lower capital costs and some of the savings they us to convince customers to use less. This is the peak load pricing issue worked at by shifting my peak demand for electricity to the left.
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If the long-run industry supply curve in a perfectly competitive market slopes upward, then very likely input prices will ____ as industry output expands
a. increase b. decrease c. remain constant d. first increase and then decrease
Consider the Prisoners' Dilemma game, and suppose one player confesses but the other player does not confess. This outcome is
a. a Nash equilibrium. b. Pareto optimal. c. a Pareto improvement over the outcome where both players confess. d. Pareto-inferior to the outcome where neither player confesses.