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water resource economics
Water Resource Economics
Spring 2024
25 points
(2-3 typed pages including tables/figures)
A vigorous debate rages over which of two potential urban water supply programs is an economically better way to supply safe affordable drinking water to residents of a large poor city. The high points of each program are:
Your task is to compare Total Annual Economic Benefits (TAEB = CS + TR – TC) of each program by ranking the economic performance of each from the view of the city’s water buyers/suppliers. You can use these abbreviations:
CS = consumer surplus = willingness to pay minus actual payments calculated for each program
TR = total revenue = price x quantity calculated for each program
TC = total cost = average cost x quantity calculated for each program
I will show you more about these terms in our class slides this week, letting you see a down-sloping water demand function for which the maximum price of water (y intercept) is $1650 per ac‐ft.
Q 1 (15 points) Calculate the Total Annual Economic Benefits (TAEB) to the city’s water stakeholders for each program and show calculations.
Q 2 (10 points). You have been hired as an expert consultant, and will snag a juicy consulting fee if you recommend the right choice. Describe your recommended choice and explain why you would make it.
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