Question

Explain how peak-load pricing is a form of price discrimination and its effect on the welfare of consumers. Provide a graphical illustration to support your discussion

Answer 1

Peak load pricing, in other words, refers to the high price that is charged to the products and services when the demand is high. It is a type of price discrimination because it’s based on efficiency where a firm discriminates on high traffic, high usage, high demand time, and low demand. It affects the consumers by extracting consumer surplus and making it into supernormal profits.