Question

Use of Internet service in a small town is high as people get ready to leave for work and after they arrive home at the end of the day. During the middle of the day, household use of this utility is very low. Increasing capacity seems like a bad idea because resources would sit idle during the time people are at work. The town council asks for your advice about the best way to solve the problem of quantity demanded during peak use hours. What advice would you give?

Answer 1

The advice I would give is that, during the peak-off periods, the price of water should be increased.

Step-by-step explanation:

In the scenario given, going along with the peak-load pricing technique is just the best approach, whereby the prices are increased in the peak periods so that its use can be reduced, then the prices in the peak-off periods are reduced so as to motivate people to increase their consumption.

The advantage of this practice is that it helps to reduce the pressure of supplying water in the peak periods, and reduces the wastage of resources when the resources are left idle in the peak-off periods.

Thus, the advice I would give is that, during the peak-off periods, the price of water should be increased.