Final answer:
An increase in equilibrium price of water to $30 per gallon would likely decrease its daily consumption due to lower quantity demanded. Several measures such as conservation, rationing, technology improvements, and desalination, as well as government interventions, might be necessary to address the crisis and ensure a stable water supply.
Step-by-step explanation:
In the scenario where the equilibrium price of water rises to $30 per gallon due to a severe water shortage, there would be significant impacts on consumption. As per the laws of demand and supply, an increase in price typically results in a decrease in quantity demanded. Therefore, daily consumption of 10 million gallons would likely decrease as individuals and businesses restrict their usage of water to essential purposes only, and substitute water with other less costly alternatives when possible.
Addressing this situation could involve several strategies, such as introducing water conservation measures, implementing water rationing programs, investing in technology to improve water supply infrastructure, and considering the desalination of seawater as a new source of freshwater. Governments might also intervene with subsidies for the poor or price controls to mitigate the impact of high water prices, although price controls can lead to inefficiencies and shortages if set below the equilibrium level.
Over the long term, it is essential to address the root causes of the water shortage, which may include climate change, overconsumption, and poor water management practices. Early intervention and sustainable planning are crucial for preventing such drastic price increases and ensuring a stable water supply.