This chapter provides a foundation to the understanding of key concepts and theories used in water economics. In accordance with this approach, firstly explained from an economic perspective conception of water and different characteristics from other goods. Then it considered demand and supply of water used for domestic purposes. Unique characteristics of water affect the water supply and demand and hence conditions in the domestic water market equilibrium. Therefore, focused on how supply and demand effect the prices in the water economy and generally, why prices do not reflect market prices. It then goes on to describe the key issues related to the economic efficiency of water market.