|
|
 Originally Posted by Savy
Actually what you'd do is wash less. As everyone would be in the same situation washing less would become more normal and therefore prices would drop, especially when people are buying purely bottled water to drink. Well what would actually happen is the government would intervene and ban bottled water but you know.
I should clarify something.
If the premise is that the tap water company raises its price, then quantity demanded would fall (move left along the demand curve) and the company would decrease supply (shift the supply curve left) if it didn't want to produce a surplus of water. Then in complement markets (like faucets), demand would decrease (shift the demand curve left), and in substitution markets (like bottled water), demand would increase (shift the demand curve right). This would send incentive signals dependent on what happened to expected profits in the respective markets and among the respective firms. Over time this could yield a decline in demand for the tap water from that specific company because the competition over those potential profits would eventually achieve lower prices than before, and this would result in the demand for the original tap water company decreasing.
|
Reply With Quote