Madeline Arzbecker
Mrs. Straub
B4 AP Economics
26 May 2015
Economics in a Bottle
A virtually free commodity has been turned into one of the world’s most profitable industries: water. Water is a vital part to the survival of all organisms -- plants, animals, and humans. Throughout history, water has been a free natural resource for everyone, but now households are spending a substantial amount of their paycheck on bottled water. The industry of bottled water has changed the economy as a whole by providing jobs and revenue, but it also has hurt individual consumers by putting a price tag on a free resource.
Although the earth is almost entirely made up of water, fresh drinking water makes up a miniscule percent of the earth’s water. Furthermore, over half of the available drinking water is trapped in icebergs. Check out this video to get a good visual on the scarcity of water. The supply of usable water is limited, but the demand for water is unlimited, so water is a scarce resource, which causes people to have to make choices. The opportunity cost for buying bottled water would be the the ability to purchase other items, however the opportunity cost to not buy bottled water would the luxury having a necessary item readily available, purified, and clean. The interesting thing about this situation is that water is need, but bottled water has now become a want. Bottled water is not necessary; however, water is and obtaining clean water has become very difficult in our industrialized economy (Water Scarcity).
The entire industry of bottled water has changed our economy. It was a rather brilliant idea to put a price tag on a free resource. Bottled water has become the second largest commercial beverage industry. In 2013, it made $102.3 billion in output -- making up just below 1 percent of the United States GDP -- and it employed over 137,000 Americans. Bottled water has raised our nation’s GDP, Gross Domestic Product, and has lowered our unemployment rate. $2.7 billion in sales tax is generated throughout the country from bottled water. The entire process of creating bottled water has positive externalities that benefit agriculture, manufacturing, construction, transportation and many other businesses (Economics). However, bottled water hasn’t always been this profitable. Over the past fifteen years the industry has grown exponentially with with the United States alone consuming 13 billion liters of bottled water (Water Is Life).
Although bottled water benefits the economy by raising the GDP, GDP fails to address environmental impacts and individual consumer impacts. The amount of plastic waste generated from water bottles has significantly increased pollution. Additionally, most cities spend $70 million every year to dispose of water bottles. Many people believe that bottled water is cleaner than tap water, so they spend on average $0.89 to $8.26 per gallon of water instead of just $0.002 per gallon for tap water. In fact, the city of New York claims that their tap water is just as safe as bottled water. About 40% of bottled water actually comes from tap water, so consumers are paying hundreds of dollars more for a false sense of safety (Problems). This increase in consumption positively affects GDP and unemployment by shifting the aggregate demand curve in the US to the right, but it hurts the environment and consumers.
Overall, the bottled water industry reflects the advancement of our nation. We have figured out how to make a necessary item readily available, while most developing countries don’t have enough drinkable water to keep their citizens alive. Although bottled water hurts the environment and eats up consumers’ money, it helps the economy as a whole and shows that businesses can market anything and create a high demand -- even a free resource like water.
Works Cited
"Economics." Bottled Water Matters. N.p., 19 Sept. 2011. Web. 21 May 2015.
"Five Years after Deepwater Horizon." Voices. N.p., n.d. Web. 21 May 2015.
"Inhabitat | Design For a Better World!" Inhabitat | Design For a Better World! N.p., n.d. Web. 21 May 2015.
"Problems With Bottled Water." Riverkeeper RSS. N.p., n.d. Web. 21 May 2015.
"Water Is Life - Bottled Water Industry." Water Is Life - Bottled Water Industry. N.p., n.d. Web. 21 May 2015.
"Water Scarcity." YouTube. YouTube, n.d. Web. 21 May 2015.
I think its interesting how much the water bottle industry brings to the economy. I think we should continue to make water bottles. With all the jobs that come with the water bottle industry. Plus water bottles are nice and efficient ways of carrying water.
ReplyDeleteIt's amazing to see how such a simple yet essential product can be milked by companies to make such a large profit for something they can get for cheap. It's also amazing to see that customers are buying into it and paying for something they can get from their sink for so much less. I really hope customers learn that they can simply buy a reusable water bottle, fill it up from the sink and save a bunch of money and help the environment as well.
ReplyDeleteIt is interesting to see how consumer tastes changed to preferring bottled water over tap water, when in fact, you mentioned that about 40% of bottled water comes from tap water. A negative externality from bottled water, however, is the plastic that is used to make the bottles. To eliminate this problem, people should switch to buying a filter that can be attached to a faucet and then a water bottle that can be used over and over, this way, they will still be getting “clean” drinking water and not have to toss a plastic bottle after one use.
ReplyDeleteMadeline, I thought that this topic was really interesting and a cool take on bottled water. It is definitely something that we take for granted and do not realize how much money that we actually spend on bottled water. It is actually kind of sad that there is so much waste that comes with bottled water. I think it is a good thing that they are starting to have plastic bottles that are reusable, it is so much better for the environment. Your thesis and use of economic vocabulary was excellent and I thought that you did a nice job explaining your ideas and using evidence to back up your arguments. Also the graphic that you used was ridiculous, that is a massive amount of growth in that particular sector of the economy. It is good that this has created jobs and introduced new companies into the economy but it is not really something that needs to be around. It is imperative to change something about water bottle companies due to the harmful environmental effects.
ReplyDeleteI was shocked by how cheap tap water really was. After reading your post it doesn’t make sense to buy a bottle of water. Especially considering the fact that you included that 40% of bottled water comes from tap water. Even then it is a multibillion dollar industry. The way you portrayed this by comparing it back to other products like peanut butter really showed what a difference in prices there are between different foods.
ReplyDeleteAlthough safe drinking water may be scarce, it is still outrageous that the prices are so high, and quite unreasonable. When purchasing drinks at concession stands, the water, a product that is a natural resource, is often at least 50 cents more than a soda, a product that must be manufactured, which is a mind-blowing concept. This proves that it is a relatively inelastic good, because prices have been increasing and people will still pay for bottled water because of its cleanliness. Great topic to relate to economics!
ReplyDeleteI definitely consume my fair share of water bottles every day, and this reading really speaks to that and to everyone who believes that bottled water is fresher than tap. In my placement exam last week, there was a reading passage that talked about this subject, and how the chemicals found in the plastic bottles themselves can be harmful to people. If this is true, then the nation is spending billions of dollars on a product that could actually hurt them rather than help them, potentially costing them more to see medical personnel if they get sick. However, because the demand for bottled water is so high, producers will not stop supplying this because they need to meet that demand. Although bottled water has its drawbacks, it will not be leaving anytime soon.
ReplyDeletePersonally, I find the idea of bottled water to be inessential and the price as elastic. Water, in developed nations, is basically a quasi-public good; drinking fountains can be found in many public parks, and businesses, as far as I know, are required to provide water to anyone who asks of it. I’m not against buying bottled water, I just find it absurd and completely unnecessary to purchase them on a regular basis when you have access to perfectly fine tap water. I have a friend who buys two bottled waters every day at lunch because he won’t drink water from the bubblers. It’s people like this, and like my sister (who refuses to drink water from the sink at our own home) who drive the demand for the bottled water industry.
ReplyDeleteWe have grown up in a word where nothing is free. That paying for water just seems normal. The water bottle industry is also growing because people are starting to have higher standards and are willing to pay more for nicer cleaner water. It is also crazy to think how the common water bottles are in my daily life and how tht is not true for everyone throughout history.
ReplyDeleteThe concept of water being sold to consumers is similar to a thing I saw in the documentary I watched for the end of the year project, Enron: The Smartest Guys in the Room. Enron made a business of trading energy securities and to up the price they engaged in some pretty unethical practices. They would force power plants in California to shut down so that the supply would artificially decrease. This led to energy crises and eventually the recall of the sitting governor. He was replaced by Arnold Schwarzenegger, so it's safe to say that Enron caused the election of the Governator.
ReplyDeleteDrinking water straight from the tap isn't a common thing for me, unless I'm up north or on a trip or at school most of the water I drink is bottled. I think you're right that the increase in bottled water shows how peoples views are changing from water being a necessity to a want with bottled water. Water is for sure inelastic. The bottled water I feel is elastic because just like bottled water became popular over time another type of water may come along but also the harmful plastic aspect of bottled water may jump start this process.
ReplyDeleteSolid blog post! I feel like in a region like we live in, the Great Lakes, bottled water is almost an accessory. Other place, where water isn't as pure, they actually need to purchase bottled water. Therefore, the necessity of bottled water is really only necessary in certain geographical locations. Water is inelastic and bottled water can sometimes be elastic. I think you did an awesome job incorporating vocabulary. I really liked how you had a video linked in the middle. Great job!
ReplyDeleteReally good post! I think it's cool that you took something so common in our everyday lives and really thought deeper into the whole thing. The idea that we pay for water like it is nothing is really strange. Overall really good post!
ReplyDeleteNice job on your post; you did well in including terms from class and including that video was very beneficial to the reader's understanding. The amount of drinkable water in the world and how much revenue comes out of its sale are two things that I don't usually think about. As a result, your post is a little bit eye-opening. It was also interesting to see how much the sales had increased over the years.
ReplyDeleteThis is an interesting topic to explore, since even though Earth is 2/3 water, only a small percentage of this is available for human drinking. It is kind of unbelievable the amount of money people can pay for this essential resource when put in a pretty bottle and called a fancy name. I'm not very surprised that this business has gone up in recent years, since even in my house, having running water available, we mostly only drink from bottled water. Good job including econ terms!
ReplyDeleteBottled water isn't a bad thing, it's very convenient to have water in a portable thing, but there's no reason to buy the super expensive stuff. Water all tastes pretty much the same, and tap water is not bad for you, like some people claim. If there was something wrong with municipal water, millions of people would be sick. Did you ever notice that Evian (water) spelled backwards is Naive?
ReplyDeleteI had no idea the bottled watered industry had such effect on GDP, it was interesting learn about it though. This was also helped by how well the piece seamlessly integrated economic topics into its general argument
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