Assume that the state and territory governments throughout Australia increase the price of water in an attempt to reduce consumption for domestic use. What are the equity considerations with this policy?
Shares in water-producing firms will increase in value.
The distribution of economic benefits resulting from the policy may be unfair to most Australians.
The policy could result the production of goods and services using lower amounts of resources.
By increasing the marginal cost of water, Australians will use less water, increasing allocative efficiency