1. many frivolous uses will go away - swimming pools, spray-and-pray agricultural irrigation
2. new sources will become viable - like desalination
Ultimately we live on a planet replete with water, it's just uneconomical to purify most of it for use at current rates. The same is not true of microchips.
At some point it becomes simpler to address this problem at the starting point rather than assuming the market will automatically fix any downstream issues.
Everything interacts with everything else in a way far to complex to fully understand for any one person or organization. The most we can do is pick something and try to set it, and let the other knock on effects work themselves out (which markets help with), and then when THOSE cause undesirable problems, rinse and repeat.
Anyway you'd need different prices for different types of consumers, because it's a basic need for humans; you can't make water unaffordable for poorer people.
I'm all for increasing the price of water and electricity for big consumers though, so that they will invest more R&D into reducing their consumption. Because when it's cheap, they'll just use more of it without thinking. That's also why coal power was (is?) a thing for so long.
That just means the shortage is not sufficiently severe to cause prices to move.
> Anyway you'd need different prices for different types of consumers, because it's a basic need for humans; you can't make water unaffordable for poorer people.
The simpler way is to give poorer people money.
Water shortages are a policy choice in any country above middle income. A simple x gallons for free per person or residence and market pricing thereafter would solve the issue for 90% of the spectrum, with potentially agricultural subsidies filling the gap. Instead, we choose a regressive policy system where individuals subsidise almond farmers.