20091117 Is Water Different Chapter 7 This chapter describes the different situations with the issue of water shortage.

. It also provides different studies that show how water is used worldwide. The general view is that water is overused and a scarce resource which shouldnt be treated as an economic good since the amount of usable water is not fixed in contrast to the total amount of water on earth. Our conclusion of this issue is that the demand for useable water in agriculture, households and industry is increasing by time because cities and populations grow. Since water is a scarce resource it is hard to meet the individuals needs and it has no substitutes thus in the long-run, useable water will be harder to obtain and therefore the price will increase. This is mostly because a persons needs and wants increase. It is important to distinguish these two since needs are vitally important for us to survive but wants often is connected to what we desire. New inventions make us using water differently. For example, before, we did not have cars and therefore we didnt have the need of car washing and another example could be the creation of toilets when we before used outhouses. The supply of water differs among countries, depending on the amount of individuals living in the society and the access of water within that country. In some cases when there is a dry period, for instance in China, they charge people depending on how much water they consume and want. Another case is for example in Iran were they cut water supply in a specific time in the day and also increase the cost of consuming water. Comparing this situation to Sweden we can directly see that this type of situation does not occur, even if the weather is dry the amount of water meets Swedish people and industries demand.

These diagrams illustrate possible scenarios in China vs. Sweden at the same time. As we see in Chinas situation, when there is no water shortage the equilibrium price and quantity is the same as Sweden. Since there is water shortage in some periods we see a change in equilibrium price which increases and the equilibrium quantity decreases. When the supply of water becomes more than normal and there is a shortage of water, the supply decreases, still the demand increase due to this fact. Compared to Sweden where the demand and supply meet at the equilibrium price and quantity and as a result there are no changes because their need is the same and the supply of water is the same in the short-run but could differ in the long-run depending on the amount of water that is useable in the future. In this case Sweden had an absolute advantage over China. Answers to questions: 1. Our neighbour should use as much water as he or she necessarily needs and not abuse the amount of water since it is a waste. By implementing a flat rate system everyone

20091117 could use as much water as they want but for a fixed price which is different from having a metered rate system the consumer pay for as much he or she has consumed. The best thing would be to have a metered rate system if paying our neighbours bill since it would probably be lower than with the other one. Concerning Sweden, people who live in rented apartments, most of the time has a flat rate system where the water cost is included in a fixed rental bill. Individuals who live in this kind of system usually dont reflect on the value of the amount of water they really are consuming. In contrast to the flat-rate system, the metered-rate system is mostly used in condominiums and sometimes rented apartments. In these cases the residents become more aware of how much they are consuming and tend to reduce the water cost and spending. Water Usage in Boulder, Colorado, before and after the Introduction of Metering

2. The statement says that the money paid by the tax payers make it possible for the government to sell water that is subsidized to the farmers. The cheap water makes the crops cheaper for the consumers and therefore the tax payers benefit in the end. There are factors though which determine whether the author should have an A or an F in economics. First of all one have to know what kind of crops and if it is a common ingredient or not. The less common it is, the less likely it is that all tax payers would buy it. Additionally, it is not likely that the return to the tax payers is exactly the same as the amount of money that they pay in tax, as the quote states. Considering theses aspects, the quote doesnt feel trustworthy and therefore the author should get an F rather than an A. 3. Farmers were able to purchase subsidized water of the federal government if they met the requirements of irrigating the crops while the citizens had to pay fines if they watered their lawns. Why were these two groups so differently treated? Well, since the federal government wanted to restrict the usage of water, preventing water shortages, they thought that people tended to waste too much water when using it to unnecessary things such as when washing the car. The water should fulfil peoples needs and not their wants and therefore the citizens had to pay a higher price. By restricted distributing of the water supply and by subsidizing the water sold to the farmers, it would encourage them to invest and to upgrade to modern irrigation systems which would lead to reduced water consumption and in he same time it contributed to the supply of crops.