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Water: An Inelastic Product

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Amrita Mohar

on 8 April 2016

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Transcript of Water: An Inelastic Product

Will this product be inelastic or elastic in the short run?
In the short run, water would become elastic
Supply and Demand Curve
-A good pricing strategy for the supplier would be to keep it in current with the quantity supplied
- also, at a point where it is still a necessity but there are no strict rules
Water: An Inelastic Product
Why is Water an Inelastic Product?
-We use it to drink, to shower, for our gardens, to clean, for our pets..
- there is no substitute to it

Why?

This is because the production of water is constant and in the short run production specifics or any natural causes cannot change it enough to make it inelastic


Is Water available? Has it been impacted by any factors lately?
-Currently in British Columbia, the water supply is available
Change in demand curve. What caused this change in the demand curve?
The Impact of Price Change
What would be a good pricing strategy for a supplier?
-If we were to use juice or pop and apply it to all of the jobs water does, we won’t have the same outcome
-If municipal governments were to increase our water bills, the quantity demanded would still be ther
e

-the fracking occurrence between Bc and Alberta which is said to have contaminated about 62% of the water supply
-this took place where the largest reserve of natural gas and oil is

-thousands of litres of run-off water containing glue and fuel products in shuswap lake
-residents that use the water are advised not to use it/others not to perform any recreational activity in ti
-about 85% of the water from the lake is used in the city of salmon arm
If we looked at the water supply in California, there is currently a drought and so water is scarce
That means that the prices of water bills will increase due to that and restrictions on the use of water will have to be put in effect

-Right now in British Columbia, water supplies are fine, so the rate remains the same
-but once summer comes into full effect, there could possibly be a lack of water resources and so there could be a slight increase in price and restrictions on water
-In the summer of 2015, there was a lack of water supply in Port Moody and so what happened was there was mandatory restrictions on water use when it came to watering your lawn

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-
since these two events happened in two different places and did not occur several times after, this would not affect all of bc
-so the only places where water would be inelastic is shuswap lake and the area between BC and Alberta
-but there have been some stories that have affected water supply..

-This is the basic supply and demand graph for water
-The demand curve is quite steep because of its inelasticity -the supply curve is flattened out, representing elasticity. The equilibrium point is where both lines meet.



-The graph shows a shift in the demand curve
-The shift to the right represents an increase in demand
- example of this shift: a rise in consumers’ income and so the general demand for the product goes up
-this is because consumers have more purchasing power which would increase their real income in buying more.



-An increase in price will not significantly impact the quantity demanded of water -seeing that there is an inelastic demand reflected in the steeper demand line,The change in price is greater than the change in the quantity demanded
- However, with an elastic supply, the increase in price shifted the quantity supplied to the right by a larger margin than the price.

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