ECON371/UBCO2024WT1/NewsWiki/group1week2
Source
Prof: I had to fix the link.
Problem
The main problem this article touches on is the droughts in Alberta caused by a significant decrease in precipitation over the last 4 years, and the impact its had on farmers in the area, namely the increase in demand for more water allocations.
Summary
This article is about how southern Albertan farmers were planning for a drought last summer, even being ready to buy water allocations. Luckily, throughout the late spring and most of the summer, there was significantly more rainfall than normal, which helped save the crop through the irrigation season. This was a relief as at the start of spring, water reservoirs in southern Alberta were almost at a record low. Other areas such as Calgary and Edmonton, were not as fortunate, as drought conditions had persisted in those areas throughout the summer. In general, the average precipitation in Alberta has decreased over the last four years, so while some farmers were fortunate last summer, this trend is still very concerning for farmers. The drought is not the only problem that influences the water supply, the rising population is also taking its toll on the water supply. Even though there was plenty of rain this summer, Alberta still needs to find a solution to the water problem, as they cannot rely on the weather alone to fix the rising demand for water.
Economic concepts
- Willingness to Pay: This is the economic concept in which the WTP is the maximum price that a consumer is willing to pay for one unit of a product or a service. The WTP can vary depending on the product or service, the consumer and the market in which it is being sold/ bought.
- Scarcity: The main issue is the scarcity of water in southern Alberta, particularly in agricultural regions. The drought and lower reservoir levels highlight how limited water availability threatens farmers and their operations. Scarcity forces difficult decisions on how to distribute a limited resource.
Application of concepts
- Concerning the issue of water allocation and the market in which this article is focused, a farmer will have a higher willingness to pay for an extra water allocation due to the fact that they require a base amount in order to produce any sort of product, and they require that product in order to make money, feed communities and boost the economy. For them, water is a necessity and they must reduce the probability of them not having enough water for the season in one way or another. *can/ will add more*
- The Davies, along with other farmers in the region, had to adapt to the limited water supply by adjusting crop plans and planning to purchase water allocations from others in the sector which shows that a normal good like water can become a tradable commodity in trying times. This reflects how scarcity can drive purchasing behavior, as well as decisions on which products to produce, how much of a product, and when to produce. When resources like water are scarce, individuals and firms must optimize usage to maximize yields.
Prof: You seem to be describing how WTP varies with the quantity. Specifically, that the WTP for water by a farmer increases as the amount of water available to them falls. This makes sense, but should be more clearly described. You did miss the example of water in class, where the WTP for water by people in cities is generally quite a bit higher than it is from those in the agricultural sector. The demand for water by farmers is based on what the value for the crop they harvest is. If the price of water is too high, then it isn't worth purchasing.
I like your observations on the impact of scarcity. A definition of scarcity is missing. A thing is scarce when there isn't enough of it to satisfy the wants of all those who would want it. It is this scarcity, which, as you describe, leads to tradeoffs.
Conclusion
While the weather last summer was some much-needed relief for the common droughts in Alberta, such rain cannot be relied on as it is not a sustainable solution to the shrinking water supply in Alberta. The decrease in precipitation in recent years in Alberta have led to a significant scarcity in water, and with the demand and the amount farmers are WTP for water only increasing as the population grows, the issue must be addressed directly and soon, otherwise farmers may find themselves unable to pay for irrigation.