Government policies affect who gets the scarce water in the western United States and how that water is used. In 2004, farmers in California's Central Valley paid as little as $10 per acre-foot, while in urban San Jose, CA, a water agency shelled out $80 an acre-foot. Price differentials between agricultural and other uses can persist only if the groups cannot trade. Critics argue that eliminating the agricultural subsidy would encourage farmers to conserve water. The California Department of Water Resources estimates that doubling water prices would reduce agricultural water use by roughly 30% (Jim Carlton, "Is Water Too Cheap?" Wall Street Journal, March 17, 2004, B1). Further, farmers would use water more efficiently. [An alternativ approach is to allow farmers to sell their (cheap) water in a competitive market-an approach some areas are using.] a. Based on the data in the description of this problem, what is the price elasticity of demand for water? The price elasticity of demand is (round your answer to two decimal places) b. What is the relationship between the price elasticity of demand for water and the effect of a price increase on water conservation? O A. Demand for water is price elastic; a one percent increase in the price of water decreases water consumption by .3 percent. O B. Demand for water is price inelastic; a one percent increase in the price of water decreases water consumption by .3 percent. O c. Demand for water is price inelastic; a one percent increase in the price of water increases water consumption by .3 percent. O D. Demand for water is price inelastic; a one percent increase in the price of water increases water consumption by 30 percent.
Government policies affect who gets the scarce water in the western United States and how that water is used. In 2004, farmers in California's Central Valley paid as little as $10 per acre-foot, while in urban San Jose, CA, a water agency shelled out $80 an acre-foot. Price differentials between agricultural and other uses can persist only if the groups cannot trade. Critics argue that eliminating the agricultural subsidy would encourage farmers to conserve water. The California Department of Water Resources estimates that doubling water prices would reduce agricultural water use by roughly 30% (Jim Carlton, "Is Water Too Cheap?" Wall Street Journal, March 17, 2004, B1). Further, farmers would use water more efficiently. [An alternativ approach is to allow farmers to sell their (cheap) water in a competitive market-an approach some areas are using.] a. Based on the data in the description of this problem, what is the price elasticity of demand for water? The price elasticity of demand is (round your answer to two decimal places) b. What is the relationship between the price elasticity of demand for water and the effect of a price increase on water conservation? O A. Demand for water is price elastic; a one percent increase in the price of water decreases water consumption by .3 percent. O B. Demand for water is price inelastic; a one percent increase in the price of water decreases water consumption by .3 percent. O c. Demand for water is price inelastic; a one percent increase in the price of water increases water consumption by .3 percent. O D. Demand for water is price inelastic; a one percent increase in the price of water increases water consumption by 30 percent.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
![Government policies affect who gets the scarce water in the western United States and how that water is used. In 2004, farmers in California's Central
Valley paid as little as $10 per acre-foot, while in urban San Jose, CA, a water agency shelled out $80 an acre-foot. Price differentials between
agricultural and other uses can persist only if the groups cannot trade. Critics argue that eliminating the agricultural subsidy would encourage farmers
to conserve water. The California Department of Water Resources estimates that doubling water prices would reduce agricultural water use by roughly
30% (Jim Carlton, "Is Water Too Cheap?" Wall Street Journal, March 17, 2004, B1). Further, farmers would use water more efficiently. [An alternative
approach is to allow farmers to sell their (cheap) water in a competitive market an approach some areas are using.]
a. Based on the data in the description of this problem, what is the price elasticity of demand for water?
The price elasticity of demand is. (round your answer to two decimal places)
b. What is the relationship between the price elasticity of demand for water and the effect of a price increase on water conservation?
O A. Demand for water is price elastic; a one percent increase in the price of water decreases water consumption by .3 percent.
O B. Demand for water is price inelastic; a one percent increase in the price of water decreases water consumption by .3 percent.
O C. Demand for water is price inelastic; a one percent increase in the price of water increases water consumption by 3 percent.
O D. Demand for water is price inelastic; a one percent increase in the price of water increases water consumption by 30 percent.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F8241480b-1130-4858-91d1-8e61f943dc4f%2F2d5123ee-fcc7-4837-9e9c-d68a73306f63%2Fts0s8dn_processed.png&w=3840&q=75)
Transcribed Image Text:Government policies affect who gets the scarce water in the western United States and how that water is used. In 2004, farmers in California's Central
Valley paid as little as $10 per acre-foot, while in urban San Jose, CA, a water agency shelled out $80 an acre-foot. Price differentials between
agricultural and other uses can persist only if the groups cannot trade. Critics argue that eliminating the agricultural subsidy would encourage farmers
to conserve water. The California Department of Water Resources estimates that doubling water prices would reduce agricultural water use by roughly
30% (Jim Carlton, "Is Water Too Cheap?" Wall Street Journal, March 17, 2004, B1). Further, farmers would use water more efficiently. [An alternative
approach is to allow farmers to sell their (cheap) water in a competitive market an approach some areas are using.]
a. Based on the data in the description of this problem, what is the price elasticity of demand for water?
The price elasticity of demand is. (round your answer to two decimal places)
b. What is the relationship between the price elasticity of demand for water and the effect of a price increase on water conservation?
O A. Demand for water is price elastic; a one percent increase in the price of water decreases water consumption by .3 percent.
O B. Demand for water is price inelastic; a one percent increase in the price of water decreases water consumption by .3 percent.
O C. Demand for water is price inelastic; a one percent increase in the price of water increases water consumption by 3 percent.
O D. Demand for water is price inelastic; a one percent increase in the price of water increases water consumption by 30 percent.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 4 steps with 2 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Recommended textbooks for you
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education