From the WSJ Micro Weekly Review:
SUMMARY: Water-short California's search to satisfy its thirst is now focusing on a new source -- the Pacific Ocean. But the process of taking salt out of seawater faces criticism over its environmental toll and cost.
CLASSROOM APPLICATION: Desalination uses a lot of electricity, which makes desalinated water expensive and means that the process damages the environment. Furthermore, the article notes that the Metropolitan Water Agency, a Southern California water authority, will subsidize the consumption of desalinated water. The environmental issues and subsidizes lead to good questions about whether government authorities should subsidize the production of a commodity that damages the environment.
QUESTIONS:
1.) What is the opportunity cost, both private and social, of desalinated water?2.) How will the increased supply of Southern California water affect the price of housing in this region?
3.) Should a government water authority subsidize the water desalination, a process that is environmentally damaging?
