Saturday, April 9, 2011

The Price of Water


How much are you willing to pay for a gallon of water? Americans frequently pay $1 for a 20 oz bottle, so would you pay $6 for a gallon of water (128 oz in a gallon)? In Minneapolis and some neighboring suburbs, residents pay substantially less than $6 for a gallon of water. Water is provided by the city of Minneapolis at a per unit charge of $3.20. A unit consists of 748 gallons of water, which makes each gallon of Minneapolis water cost $0.004![1]


The price of water is controlled by the city because water is a natural monopoly. Natural monopolies, such as gas, sewer, electricity, etc. need a substantial start-up to begin business. However, once this investment has been made, the company has full control over the market because the economies of scale create a high barrier of entry for other firms. Therefore, the government needs to intervene and provide price controls to support consumer interests. In Minneapolis, the water business is controlled by the Minneapolis Water Treatment & Distribution Services.


Minneapolis relies on one source for its water supply, the Mississippi River. The city produces 57 million gallons of water per day, which equates to about 60-70 gallons per day for the average residential consumer. The largest water consumers in the service area are the University of Minnesota, Metropolitan Airport Commission, and Hennepin County Energy Recovery Center.[2]


Minneapolis water consumers use less water than the national average for cities of comparable size. According to the 2010 Minneapolis water quality report, the per unit charge promotes water conservation. This report states that Minneapolis has seen a decrease from the early 2000s in per capita water consumption.[3] Although there may have been a decrease in water consumption during the 2000s, is it accurate to assume that this is due to a “high” charge that discourages water use?


In addition, at $0.004, water seems fairly cheap and Minneapolis could do more to promote conservation in the region. If Minneapolis did more about encouraging the conservation of water, is increasing the price of the good the best option for controlling demand? Also, a higher charge for water would be regressive. Is conservation worth the price of hurting low-income families?



[1] "Rates." City of Minneapolis. Apr. 2011.

[2] "Minneapolis Water Facts." City of Minneapolis. Web. Apr. 2011.

[3] Minneapolis Water Works. Water Quality Report. Minneapolis, 2010.

8 comments:

  1. Perhaps a two-tiered rate system would address the conservation and regression issues. First determine the amount of water that a family would use “in-house” and add a buffer. This way, the rate for water quantities under this threshold would remain at the old rate and amounts used above this amount would be charged at a higher rate. This would keep the tax more regressive while promoting conservation.

    ReplyDelete
  2. I read a article under the same title some time ago, but this articles quality is much, much better. How you do this..tax services Houston

    ReplyDelete
  3. Tree service is a lesser known scene service, which is centered on trees. Provided that you have a view, this is one of the most drastically critical services that you should have, in light of the fact that this will guarantee that your scene can be in flawless condition. In this piece, we will be exchanging ideas about the nuts and Tucson Tax Service of a tree service and the things that you ought to have prior knowledge regarding their services.

    ReplyDelete
  4. This is getting a bit more subjective, but I much prefer the Zune Marketplace. The interface is colorful, has more flair, and some cool features like ‘Mixview’ that let you quickly see related albums, songs, or other users related to what you’re listening to. Clicking on one of those will center on that item, and another set of “neighbors” will come into view, allowing you to navigate around exploring by similar artists, songs, or users. Speaking of users, the Zune “Social” is also great fun, letting you find others with shared tastes and becoming friends with them. You then can listen to a playlist created based on an amalgamation of what all your friends are listening to, which is also enjoyable. Those concerned with privacy will be relieved to know you can prevent the public from seeing your personal listening habits if you so choose. Fathers Day Wallpaper For Mobile

    ReplyDelete
  5. This is such a great post, and was thinking much the same myself. Another great update. Friendship Day gift on friendship day

    ReplyDelete
  6. There are three main reasons many people fail building business credit. The 1st BIG reason people fail, is that their business isn't setup credibly in the lender's eyes. The perception lenders, vendors, and creditors have of your business is critical. Before applying blue sky cash business credit a business must insure it meets or exceeds all lender credibility standards. There are over 20 credibility points that are necessary for a business to have a strong, credible foundation.

    ReplyDelete
  7. Payday loans convert money calculator an excellent resource for those who need emergency cash fast. They have come under fire, especially recently for their high interest rates. There are a few remaining reasons that a payday advance would be useful.

    ReplyDelete
  8. Information on purchase order financing in Canada. How does P O finance and financing inventory work for firms with contracts and orders that cant be financed via your bank. crypto trading

    ReplyDelete