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Microeconomics: Principles & Policy

14th Edition
William J. Baumol + 2 others
Publisher: Cengage Learning
ISBN: 9781337794992

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BuyFindarrow_forward

Microeconomics: Principles & Policy

14th Edition
William J. Baumol + 2 others
Publisher: Cengage Learning
ISBN: 9781337794992
Chapter 5, Problem 1DQ
Textbook Problem
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Describe some of the different ways you use water. Which would you give up if the price of water were to rise a little? If it were to rise by a fairly large amount? If it were to rise by a very large amount?

To determine

The effect of price change on demand of water.

Explanation of Solution

Water is most crucial and important for everyone. There are various uses of water. Water can be used for domestic as well as non-domestic work. It is used in agriculture and industry and in various other sectors.

The uses of water are the following:

  • Domestic use of water: water used in drinking, preparing food, bathing, washing clothes and dishes, and watering the yard and garden.
  • Water is a mandatory element for most of the crop production. It is used for irrigation in the agricultural sector.
  • It is used to produce electricity and used in industries that produces petroleum products.

Since water is like a necessary good for everyone. The elasticity of demand for water is near to perfectly inelastic. It means the change in the price of water doesn't impact the demand of water on a large scale...

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