Bolivian Water Price Determination

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A graph Showing Price Determination by Market under Different Quantities

Price Determination by Market under Different Quantities

As the government of Bolivia imposes the price floor on the sale of water, a number of issues will consequently emerge. Primarily, setting the price floor above equilibrium price means suppliers will no longer be supplying water at the equilibrium price but at the price set by the government. On the other hand, consumers will demand less water. This means there is a likelihood of having a surplus as this policy attracts more suppliers into the industry of water supply. Because water is, a basic commodity government will be forced to intervene in the industry by giving subsidies that end up meeting some costs supposed to be paid by consumers.

The government of Bolivia was forced to privatize its water public system by the World Bank if they were to receive future financial packages (Schultz 1). This was mostly due to corruption that involved with the supply of water across society. The government thought of extending a contract to a Californian company known as Bechtel. Noticeably, the company supplied water at an extremely high price that forced Bolivians to protest severally over the price hiking.

The Government attempted to use force but failed in the end and had to resolve by offering temporary rollback on the high water prices. Although this happened, the anti-privatization movement needed a permanent rollback and the cancellation of the Bechtel contract. This led to more protests and eventually the government had to declare a state of martial law in which media stations had closed down while protest leaders were arrested. It was at the height of this protest that Bechtel flew away as protesters demanded the control of the water supply to be handed over to the hands of the public(Schultz 2).

The government should have thought of giving the contract to local companies and further impose a price ceiling. This would have protected consumers against overpricing of water. In addition, it would have insulated water against monopoly. Equally, it could have established a strong constitution that would shield the water supply in the country against corruption. This would have ensured the fair distribution of water and maintenance of affordable prices at the market (Quah and Wilson 114).

Factors that Contribute to Exchange in the Flats

The study that was carried out on the social network build-up by relatives and close friends with an aim of supporting each other reveal a lot particularly the factors that led to exchange existing among families and friends living in The Flat. Primarily, these individuals are poor or earn little salary because most of them are low-skilled workers (Stack 33). Among the factors that influence exchange, include:

Poverty: this means no individual has enough resources to satisfy his/her wants and has to rely on others for support.
Scarcity of resources: resources are in short supply and therefore network is a viable means of redistributing resources fairly across the community
Urgency and need of obtaining necessities: if one lacks immediate money or goods to satisfy their wants, they have to look for support from friends or relatives
Good reputation: this helps one to develop trust in someone upon his help. Reputation is good for an organization because it acts as goodwill that sells the product of the firm.
Sympathy: ones feelings towards someone will determine his degree of supporting him/her
Power of recognizing a gift given by a relative or friend: this determines the level of one returning the same favor to the giver
Ones status: if one is in a better position maybe financially then he/she is more likely to offer support
Influence from members of the network: the behavior of giving by others may also influence one to give out
The flow of Information and gossips about someones position: If one is known as having something good more than others then he may end up sharing
Close ties developed over a long time: increases the level of trust
Dx = fx(poverty, scarcity of resources, urgency and need of obtaining necessities, information about others position, one status, good reputation)
Sx =fx(good reputation, ones status, power of recognizing a gift earlier given, sympathy, influence from members) (Stack 42).

Works Cited

Quah, Euston and Wilson, Peter. Principles of economics: An Asian edition Chapter 6. Supply, Demand and Government Policies. Singapore: Cengage Learning. 2008.

Schultz, Jim. Economic, Social and Cultural Rights in Latin America: From Theory to Practice The Right to Water Fulfilling the Promise. 2002.

Stack, Carol. All our kin: Strategies for Survival in a Black community. New York: Basic Books. 1975: 33-44.

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Bolivian Water Price Determination

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