ECO205Y5- Midterm Exam Guide - Comprehensive Notes for the exam ( 44 pages long!)
Document Summary
Water shortage problem: an imaginary island is subdivided into 100-home estates, water for these homes comes from several wells owned by the estates water. 60 000 litres in july and 20 000 in august: each household would prefer to consume 40 000 litres of water in each of. Even though total water usage is the same, every household would prefer to consume the balanced profile of 40 000 litres in each july and august. Each household could be better off if there were some way to induce everyone to save 20 000 litres in july for use in august. This is where metered water scheme plays a role, which could bring a balanced water profile. Expensive of monitoring must be compared with benefits of balanced water use. This problem is commonly referred to as common property problem. In non-metered scheme, wells are common property and there is insufficient incentive to curb water usage.
