Scarcity Two fundamental elements: –Limited/Finite resources –Unlimited and often competing wants/desires/needs The consequences –People must make choices –Every time we make a choice, something is given up –We call this opportunity cost

Rational choice People choose the alternative they believe is “best” –People typically choose the alternative they believe to have the greatest excess of benefits over costs –It makes them better off! –Social outcomes are the result of individual choices

Water Use How much water do you use? How much do you need?

1.Is Water Scarce? 2.Does people’s use of water reflect rational choice? 3.Does people’s use of water respond to incentives?

Domestic Use Indoor and outdoor household purposes Drinking, preparing food, bathing, washing clothes and dishes, brushing your teeth, watering the yard and garden, and even washing the dog.

Domestic Water Use The water industry estimates that an average person uses 3,000 gallons of water monthly, so a family of 4 would use 12,000 gallons, for bathing, cooking, washing, recreation and watering. 300 million US population

Water Use by Category Domestic Commercial Industry Irrigation Thermoelectric power Mining Livestock Hydroelectric power Wastewater treatment

Water Use Per capita water use is about 1400 gallons per day in the U.S, individual water use is only a drop in the bucket. –Agriculture 41% –Electric generation cooling 38% –Industry 11% –Public tap water 10% There are many regional differences in the amount of water used. In the West, most of the water is used for irrigation, while in the East more water is used by industry.

How many liters of water does it take to produce one serving of...

Review Water IS an economic good: –It’s scarce it has multiple uses, and one use entails giving up another (opportunity cost) –people’s use of water responds to incentives price is an extremely powerful incentive for people to find and use substitutes for water How much water do you “NEED” ? –It depends: on the circumstances on personal interests, tastes, and values On the price of water

Water Use (and other choices) A Simple Fact… The lower the opportunity cost, the more we do! If we want people to use less water…. We must raise the cost! Education and awareness can also help. What’s your ?

What about ELECTRICITY?