In the United Arab Emirates fresh water is not a natural resource. Water is either desalinated or imported. May is here and we are heading into the heat of Summer (or alternatively known as the heat of Spring, Summer and Autumn….and a bit of Winter). The car temperature today was 41◦C, soon it will be a daily 50◦C. Water is such an important product and so bottled water is a highly demanded product.
Task Spotting and The National newspaper has uncovered some interesting information on bottled water from both a qualitative and quantitative perspective:
From a qualitative perspective, 92% of those surveyed, pay for bottled water while eating out and 94% felt it was overpriced. However from a quantitative perspective, there is a price variation of up to 900% for 500ml and 500% for 1500ml, inferring the product is selling at these prices. How does this strong customer opinion have no impact on the price?
- In most countries, bottled water has a high elasticity of demand because there is availability of substitute goods such as tap water and home rain water tanks.
- Water is a necessary good and the higher the necessity, the lower the elasticity.
So we are confronted with no substitute and a highly necessary good, it truly is a captive market.