Demand modification, a program that encourages reduced water consumption, seems to be the most feasible alternative to reducing the present trend of spiraling increases in water demand. Demand modification offers an opportunity to reduce both residential and commercial water demand by more than 30 per cent. These changes in demand may occur at the critical price, the flat rate price, or the price at the minimum quantity demanded. Such changes must be considered in water‐demand forecasting and in assessing the impact of demand‐modification programs.