During the California drought, one California community tried to reduce its residents' water consumption by imposing an escalating water price (the marginal price of water rose with monthly use by households). A state judge ruled that the pricing system violated the state's constitution, which required that water be priced no higher than its cost. Since the cost of securing water had not risen, its price could not be increased. Was the judge's ruling correct on an economic point, that the cost of water had not risen during the drought? (before trying to address that question, you should reflect on the meaning of "cost" of anything and on whether the cost of anything goes up when it becomes scarcer.)

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In the California drought one California community tried to reduce its residents water consumption by imposing an escalating water price The marginal ... View the full answer