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Economic theory suggests that trade in water rights is a way to reallocate water from less to more economically productive activities. [15] Water rights based on prior appropriation – first in time, first in right – led to inefficient water allocation and other inefficiencies, like overuse of land and less adoption of water conservation technologies. [16]
Marginal considerations are considerations which concern a slight increase or diminution of the stock of anything which we possess or are considering. [4] Another way to think of the term marginal is the cost or benefit of the next unit used or consumed, for example the benefit that you might get from consuming a piece of chocolate.
The use of groundwater banking can make water a more homogenous commodity. This can create a market value which will enhance private investment increasing the benefits. [9] It will also align marginal benefit with marginal cost causing the market to come to an economically efficient level. [9]
Runoff of soil and fertilizer on a farm field during a rain storm. Nonpoint source (NPS) water pollution regulations are environmental regulations that restrict or limit water pollution from diffuse or nonpoint effluent sources such as polluted runoff from agricultural areas in a river catchments or wind-borne debris blowing out to sea.
Water metering might benefit society by providing a financial incentive to avoid waste in water use. [ 20 ] Some researchers have suggested that water conservation efforts should be primarily directed at farmers, in light of the fact that crop irrigation accounts for 70% of the world's fresh water use. [ 21 ]
This is the level at which, in the long-term, the marginal cost of leakage control is equal to the marginal benefit of the water saved. The rate of reduction in leakage has slowed for many companies because the most obvious causes of leakage have been detected and addressed, leaving only less apparent leakage problems. [ 23 ]
A market can be said to have allocative efficiency if the price of a product that the market is supplying is equal to the marginal value consumers place on it, and equals marginal cost. In other words, when every good or service is produced up to the point where one more unit provides a marginal benefit to consumers less than the marginal cost ...
In terms of water supply, another example is the limited water available in arid regions (e.g., the area of the Aral Sea and the Los Angeles water system supply, especially at Mono Lake and Owens Lake). In economics, an externality is a cost or benefit that affects a party who did not choose to incur that cost or benefit.