Is piped drinking water drinkable in India? If it's
drinkable, is it chargeable? Both answers are a big "No" in New Delhi. However, bottled, private mineral water is priced in New Delhi. The early classes of the micro-foundations of economics made us think in the following way: a) A normal good has a negative price elasticity of demand, whereas, for a luxury good, the same demand curve is positive.
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| Data Source: Open Government Data (OGD) Platform |
Thus, if the price of a luxury good increases, then the quantity demanded of the same good goes up due to the income effect. On a similar note, for a normal good, if the price increases, the quantity demanded of the normal good falls down. In this way, if there is no clean piped drinking water in New Delhi, and the only reliable, clean drinking water for middle and upper-income class households is bottled mineral water, will its consumption go down for such households if the price goes up. The answer to this is too a big
"No". Then why water which is so necessary and normal as a good for
survival is often not priced whereas diamond which is not necessary for human
survival is still priced high when people consume diamond in the form of
wearing a jewellery from South Ex shops of New Delhi.
Well, I got an answer to this paradox a month back while
treating my international guests with a glass of wine in a well known
restaurant of Khan Market of New Delhi. As a host during the dinner in the well
known lutyens location of Khan Market when I ordered for a bottle of wine for
my guests it was charged. The bottle of wine, in the location of Khan Market
acted as a normal good. However in the same restaurant and during the same
dinner, when I only consumed 10 ml red wine in comparison to the entire crowd
who were ordering bottles of wine, my 10 ml wine was uncharged by the
restaurant. They gave a price signal that in the relative positioning space of
a consumerist society and a typical lutyens Delhi restaurant, 10 ml wine was
almost like a free water and was free, uncharged while other bottles of wine
were charged as a normal good.
I understood, how, class, consumption, relative welfare
position of a consumer in a society was making the same red wine free (in
marginal amount of 10 ml) for one and chargeable for others. I could realise
when the same good transforms to be a normal to a luxury across societal
classes based on the social, consumerism culture. In my micro foundation class
of economics, I experienced how - "Water and Wine can both become a free
good in a society" in a completely paradoxical and antithetical way.
Possibly microeconomics needs to be written in a new way with "Water and
Wine"!
Originally posted at: https://geekonomistdiary.
By
Prof. Anandajit Goswami
School of Behavioural and Social Sciences, Research Director, MRIIRS, Faridabad.
To cite this article: Goswami, A. (2025, January). Water and Wine as a Free Good. Eco-Bizz Department of Economics.
https://ecobizzblog.blogspot.com/2025/01/water-and-wine-as-free-good.html
Article received on: 25 January 2025
Published on: 30 January 2025
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