Question: Given the following procedures for establishing an increasing block tariff, determine the best prices for the first for four blocks for a town in a

 Given the following procedures for establishing an increasing block tariff, determine

Given the following procedures for establishing an increasing block tariff, determine the best prices for the first for four blocks for a town in a developing country were family income is US$100 per month. [First Block]: The poorest households have access to a lifeline amount of water and do not spend more than nine (9) percent of their income on water; [2] (Second Block]: The ideal per capita water consumption level is defined, which will ensure "Well-being"; this "well-being" amount is e.g. three (3) times the ifeline amount: all water consumed over and above the lifeline amount, but less than the well-being amount, is charged at the Full Cost of Water Supply (FCWS estimated at US$2.5/m3); meaning that the average price of water is still less than FCWS, so these households still receive subsidy. [5] [Third Block] Those households that use water over and above the well-being amount, but less than a certain upper limit (e.g. three (3) times the lifeline amount) will pay the full cost of water over their entire use; this means that the tariff of the third block should off-set the implicit subsidy that these users receive in the first block [6] [Fourth Block]: Water use over and above the amount specified in the third block will be charged at a rate that will off-set the subsidy received by households falling within blocks 1 and 2, plus an surplus mark up of 25% [5] Given the following procedures for establishing an increasing block tariff, determine the best prices for the first for four blocks for a town in a developing country were family income is US$100 per month. [First Block]: The poorest households have access to a lifeline amount of water and do not spend more than nine (9) percent of their income on water; [2] (Second Block]: The ideal per capita water consumption level is defined, which will ensure "Well-being"; this "well-being" amount is e.g. three (3) times the ifeline amount: all water consumed over and above the lifeline amount, but less than the well-being amount, is charged at the Full Cost of Water Supply (FCWS estimated at US$2.5/m3); meaning that the average price of water is still less than FCWS, so these households still receive subsidy. [5] [Third Block] Those households that use water over and above the well-being amount, but less than a certain upper limit (e.g. three (3) times the lifeline amount) will pay the full cost of water over their entire use; this means that the tariff of the third block should off-set the implicit subsidy that these users receive in the first block [6] [Fourth Block]: Water use over and above the amount specified in the third block will be charged at a rate that will off-set the subsidy received by households falling within blocks 1 and 2, plus an surplus mark up of 25% [5]

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