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In California and many other states, there is a severe drought. What has happened to the...

In California and many other states, there is a severe drought. What has happened to the supply curve of water? If there is a shortage of water, what will happen to the price of water? Do you agree that this change in the price of water is the best way to eliminate the shortage? Is this a fair way to reduce the shortage? Do you have any other ideas to eliminate the shortage? How will the drought impact agricultural goods' supply curves and their prices?

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Answer #1

Due to the Drought condition, the supply of water will decrease. This will move the supply curve to the left at a higher price and lesser quantity. The price of the water will increase.

If we change the price i.e. increase the price of the water will reduce the demand for the water in the rough condition but water is essential for life. Increasing the price will make water out of the reach of many poor people and they will be forced to migrate to other place or die without water.  

To eliminate the shortage of water government should increase the supply of water. Do some rainwater harvesting or just transport water to California.

Drought will adversely impact the agriculture as water is one of the many inputs of agriculture.

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