Water Elasticity

Do Residential Water Consumers React to Price Increases?
cause from a Natural Experiment in Santa Cruz
Shanthi Nataraj

I

n modern years, urine supply utilities in the
western United States set out found
it increasingly difficult to meet the
growing demand for water. The rapid
growth in demand, coupled with the
decreasing availability of new water
supplies, has prompted many utilities
to support water conservation among
residential consumers.
Water utilities use a wide range of
measures to promote conservation.
During droughts, they often resort to
water rationing, lawn-watering prohibitions, and other mandatory controls. At
other times, they encourage voluntary
water-saving measures; for example,
several cities tenderise rebates for purchasing low-flow washing machines, or conduct public knowledge campaigns.
Many economists argue that price
give the axe also be a powerful tool for encouraging conservation. If we disregard
fixed costs and submit that water is a
renewable resource (ignoring, for example, aquifer depletion), then an efficient
market ordain set the marginal price of
water (the price of unity additional unit)
equal to the marginal cost (the cost of
producing single additional unit).





Marginal Price

Using a natural experiment from
the city of Santa Cruz, California, we
find that a 100 percent increase in the
marginal price of water resulted in a
15-5 percent decrease in demand
among high-use consumers. Our
results suggest that price flowerpot be an
effective water demand management
tool, and that increasing-block
pricing can successfully encourage
water conservation among high-use
households while maintaining overall
affordability.

However, public utilities have historkeeping water affordable for most
ically set water prices far downstairs marhouseholds.
ginal cost. There is an ongoing debate
Do Prices Matter?
about how a good deal prices must be raised
in order to reduce water demand. While
Over the past two decades, a growmany studies...If you want to observe a full essay, order it on our website: Ordercustompaper.com



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