Droughts and climate hazards are getting more and more common every day. This affects the environment and how people interact with it (i.e. water supply and changes in crop distribution given changes in crop production function requirements). This kind of events have economic consequences that change the surplus of economic agents such as households, farmers and industrial enterprises.
Knowing the physical implications of these changes, this paper quantifies the economic effect of climate change and population patterns (among other factors), on the residential and agricultural sectors’ welfare which need to change their behavior to optimize the use of an affected, such as water.