EC238 Lecture Notes - Lecture 8: Shortage
Document Summary
As water become still scarcer, the demand becomes perfectly inelastic. In the market economy, the most efficient use is the use that creates the highest value (twp). But with unequal distribution and growing relative scarcity of water, many people have very limited means to pay. Many public and private utility companies are natural monopolists. In many parts of the world, excess demand for water is causing great stress, for example, fracking. Groundwater levels have also been declining in many areas due to intensive pumping. Water quality is also a growing problem. Excessive withdrawal from aquifers is a major cause of land subsidence. Surface water rivers, lakes and oceans; clean-up policies typically have focused on surface water. Both groundwater and surface water are used for irrigation and drinking. Surface water also provides additional benefits such as recreation and wildlife. This may require that different policies be used to protect the two different types of water.
