Question

Write a brief study of this product, (1) describing recent or historic supply and demand shifts for the good, (2) describing any price controls that have been put into place on it, and (3) using the criteria described in the text and in lectures to determine whether demand for the good is elastic, inelastic, or unit-elastic. If you have data and can directly estimate price elasticity of demand, please do so, but you are not expected to.

The product would be water

Answer 1

1) At low costs, customers won't focus on the utilization of water and will just figure out what they will utilize it for, not the amount they will utilize. Until there is a substantial rise in the price of water, the demand curve will continue to shift to the right while the quantity will level off and force the price to go up. A demand curve for water is likely to be very steep in the short run whereas, the supply curve will shift to left.

2) In a privatized monopoly (e.g. power, gas, water – where there is no opposition) the administration controller may assume a part in constraining how much prices can be increased.

3) The price elasticity of water is inelastic.