Abstract
Any discussion on energy pricing or appropriate pricing of energy goods and services invokes a passionate debate due to the pervasive nature of energy use and the socio-economic and political implications of energy pricing. Energy consumers at the receiving end of pricing bear the direct consequences of pricing policies, especially so when the demand is inelastic and the substitution possibility is limited. On the other hand, appropriate pricing is essential for energy suppliers. Can the economic theories provide any guidance in this area? The objective of this chapter is to provide some economic understanding of the issues related to energy pricing and to show that even from a theoretical perspective, the problem may not be as easy as it appears.
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Notes
- 1.
In mathematical terms, \( \frac{dAC}{dQ} = {\frac{{d\left( {\frac{TC}{Q}} \right)}}{dQ}} = {\frac{{Q\, \cdot\,\frac{dTC}{dQ}\, - \,TC}}{{Q^{2} }}} = {\frac{Q \,\cdot\, MC\, - \,TC}{{Q^{2} }}} = 0; \)
- 2.
See OECD database at http://www2.oecd.org/ecoinst/queries/index.htm.
- 3.
- 4.
See Pearce et al. (1994) for more details.
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Bhattacharyya, S.C. (2011). Energy Pricing and Taxation. In: Energy Economics. Springer, London. https://doi.org/10.1007/978-0-85729-268-1_13
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DOI: https://doi.org/10.1007/978-0-85729-268-1_13
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