Is Water a Free Good?
Read the International Food Policy Research Institute's summary of Mark Rosegrant's article on water scarcity.
Questions:
- Is water a free good or a scarce good? Why?
- Why would a higher price for water reduce the likelihood of a future water shortage?
- Water is a scarce good because there the quantity demanded exceeds the quantity supplied when the price is zero.
- A higher price would cause consumers and firms (particularly farms) to use less water. It would also provide more incentive for firms to discover new sources of water (perhaps through more efficient waste-water recycling techniques).
Economics
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Employing the government budget diagram shown in Figure 5-1 above, assume that the economy is initially in equilibrium at point A. The movement A to D represents
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