Asynchronous Task 01/08/23

Define and explain how the concept of scarcity applies to the situation described in
the case study:

When there are not enough resources to satisfy all of the wants and requirements of
people, the basic economic idea of scarcity emerges. In the case of the rapidly growing
city facing water scarcity, the resource that is scarce is water itself. The increasing
population and limited water sources have led to a situation where the demand for water
surpasses the available supply, causing a scarcity of clean drinking water and water for
daily activities. The city's limited water resources are unable to keep up with the surging
demand, making it challenging to provide adequate water supply to all residents,
industries, and agricultural activities. The local government must therefore make difficult
decisions in order to distribute the limited water resources across these sectors.

Analyze the choices the city government must make to address the water scarcity
issue, using relevant economic assumptions and principles. Evaluate the potential
consequences of these decisions on different stakeholders:

The city government faces several choices to address the water scarcity issue, and these
decisions can be analyzed using relevant economic assumptions and principles. Here are
some potential choices and their consequences on different stakeholders:

a. Implementing Water Conservation Measures: The government could promote water-

saving technologies and enforce strict water conservation measures to reduce overall
water consumption. While this may help alleviate immediate scarcity, it could lead to
resistance from industries and farmers who rely heavily on water for their operations.

b. Investing in Water Infrastructure: The city could invest in improving water

infrastructure, such as building new reservoirs, upgrading pipelines, and developing
desalination plants. While this may increase the water supply capacity in the long run, it
requires significant upfront investment, which may strain the city's budget.

c. Allocating Water Rights: The government may allocate water rights or permits to
different sectors, prioritizing certain uses over others. For example, they might prioritize
drinking water supply over industrial use. However, this could create tensions and
conflicts between stakeholders who feel their needs are not adequately met.

d. Market-Based Solutions: The city could implement market-based approaches like

water pricing and water markets. By pricing water based on scarcity, it encourages more
efficient use and incentivizes conservation. However, this approach may
disproportionately affect low-income residents who may struggle to afford higher water
prices.
Identify and discuss the opportunity costs associated with the choices made by the
city government in allocating water resources. How do these trade-offs impact the
city's overall development and well-being?

The choices made by the city government in allocating water resources come with
opportunity costs, which are the benefits foregone by not choosing the next best
alternative. For instance:

a. Allocating more water to the residential sector may ensure citizens have access to clean
drinking water and sanitation, improving their well-being. However, this might result in
reduced water availability for industries and agriculture, affecting economic productivity
and potentially leading to job losses.

b. Prioritizing the agricultural sector's water needs may support food production and
secure the livelihoods of farmers. But this could reduce the available water for residents
and industries, leading to higher living costs and potential economic slowdowns.

c. Investing heavily in water infrastructure may lead to improved water availability and
better services in the long run. However, the city government will have to forgo investing
in other crucial areas like education, healthcare, and public transportation.