Question

Extract 2: Bottled water and sustainability

“It isn’t uncommon to see someone with bottled water in their hand while on campus. Use of bottled water has increased over the past few decades. This article highlights the impacts of bottled water consumption, using the sustainability framework.

There is a growing body of evidence to suggest that bottled water can have detrimental effects on human health. One study found that many brands of bottled water were deficient of essential minerals such as magnesium, potassium and calcium.Another study found that 20% of the bottled water samples had concentrations of chlorine, and other harmful compounds that exceeded the World Health Organisation guidelines. Other health concerns related to harmful chemicals released from the bottle.

The environmental effects of bottled water use are also extensive. Three litres of water are used directly or indirectly in the production of one litre of bottled water. The majority of bottles are made of plastic and end up in landfill sites rather than being recycled. Others end up in the oceans, killing fish and birds who mistake it for food. Furthermore, it takes up to a thousand years for plastic to decompose.

Furthermore, bottled water is often transported hundreds of miles from its origin to shops and consumers, at considerable carbon cost, meanwhile tap water only takes a little energy to pump along pipelines into homes. Bottled water is also expensive and consumers can pay anything up to 10 000 times more than if they just drank tap water. Studies have shown that tap water is generally just as clean and healthy as bottled water, if not more so.”

1. Regarding Extract 2, analyse the economic effects in terms of external costs, of the production and consumption of bottled water.

Answer 1

When any economic activity imposes a negative externality, it does so through certain external costs on society.

For bottled water, both the consumption and production impose external costs.

Following is a summary of the major external costs:

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Consumption

• Mineral deficiencies get created in the human body due to consumption of bottled water
• Bottled water contains harmful chemicals like chlorine, which harm the body
• The plastic bottle itself contains harmful chemicals, which harm the body
• Bottled water is many times more expensive than tap water, and thus has huge opportunity costs of consumption

Production

• Three units of clean water are wasted for one unit of bottled water
• Plastic bottles create pollution, either on land or in the ocean, and take ages to decompose
• Transportation of bottled water entails wastage of fossil fuel

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All these external costs are imposed on the consumers, producers as well as bystanders.

Though buyers are "willing to buy" and sellers are "willing to sell", it is still not a socially optimal allocation.