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The Economic Setting ,:-.; The Albuquerque metropolitan center plays such a dominant role in the economy of the Middle Rio Grande area that most, if not all, of the economic adjustment that might be triggered by changes in the quantity, quality, and use of resources associated with the Upper Rio Grande Basin would occur in it. The metropolitan areas ofEI Paso and Las Cruces contain most ofthe economic activities that would have to adjust if a management decision concerning the Basin were to affect water flows downstream of Elephant Butte. Industrial activity occurring outside the metropolitan cities- primarily agricultural activity in Socorro County and Sierra County and in the nonurban sections of the counties in the Albuquerque and Las Cruces MSA-are a small element of the study area's overall economy." And, more important, this agricultural activity does not exist in isolation from the metropolitan centers that provide most of the transportation, financial, warehousing, and other services that support agriculture. '-, .;-^, -' -' ~-- . ~) ~:?,! C. Economic Values Associated With the Basin's Water and Related Resources ,'" -. If the Basin's resources were allocated in a manner consistent with competitive markets, then market forces would ensure that the resources would be allocated to those who place the highest value on them. As the economy changed over time, some demands for a particular resource would grow, others would diminish, and the allocation of resources would shift accordingly through a dynamic process involving multiple, voluntary transactions and exchanges. The forces of demand and supply would reach a dynamic equilibrium, in which the market price for each resource reflected both the cost to sellers of increasing the supply by a small amount and the value that buyers place on increasing their demand by a similarly small amount. .-:' I',' ;t, ~;i -~, Reality, however, is far different from this ideal. There are few transactions allowing resources to move from a low-value use to one with a higher value. Some demands that reflect a relatively low value for a resource are satisfied while others that reflect a relatively higher value do not. Few resource users pay a price that reflects either the value they place on the resource or the value others place on it. As a result of the disparities between ideal and · Expanding the analysis to include the nonmetropolitan areas north of Santa Fe would not alter the conclusion that most of the Basin's economic activity occurs outside the agricultural sector. iJ1)Q36 ' ....Ioov 55