Ed Dodson responding... [EMAIL PROTECTED] wrote: > Very often for water bills, you have to pay more per unit once your consumption goes >above a certain level. This might make it seem like the price goes up because your >quantity demanded goes up(which reverses the causality) and would mean an upward >sloping demand curve. Ed here: I would expect that consumer sensitivity to higher marginal prices is very dependent upon household income. Lower income households would tend to curtail water consumption as marginal unit prices increase; moderate income households would be less prone to do so and higher income households not at all sensitive to pricing increases. Another variable, of course, is whether the households allocate water for lawncare. Households with large lawns (and sprinkler systems installed) may simply absorb the increased costs in order to maintain their lawn in accord with the "neighborhood standard". I wonder whether a similar analysis would apply to business use. > > But if there is a fixed amount of water available per day (let's say due to a given >amount of rainfall), if you use more than average, you are making water scarcer >(reducing the supply) and when supply decreases, the price goes up. Thus, if you >want to increase your quantity demanded, you must pay a higher price. So it is >quantity demanded that seems to cause price, not the usual case where price causes >your quantity demanded. Ed here: I assume you are referring to a rationalized rather than typical market. Water provided by public agencies is priced based on the successful pursuit of subsidy in many parts of the U.S. Water projects are funded by the Federal government and the debt paid for out of general revenues rather than user charges. Water brought to arid parts of the country in order to irrigate land for crops is a case where heavily subsidized water results in two things: (1) waste; and (2) creation of an imputed income stream to landlowners that is capitalized into higher land prices (e.g., if farmers were paying the true cost of water, farmland prices would be much lower but profit margins from actual farming -- as opposed to the buying and selling of land as a speculative investment -- would be the same.
begin:vcard n:Dodson;Edward tel;fax:215-575-1718 tel;home:856-428-3472 tel;work:215-575-1819 x-mozilla-html:TRUE org:Fannie Mae;Housing and Community Development, Northeast Regional Office (NERO) version:2.1 email;internet:[EMAIL PROTECTED] title:Senior Affordable Housing Business Manager note:If you need to reach me during non-business hours, send an email to: [EMAIL PROTECTED] adr;quoted-printable:;;1900 Market Street=0D=0ASuite 800;Philadelphia;PA;19103;U.S.A. fn:Edward J. Dodson end:vcard
