From TheEvolvingPlanet.com (Lornajane Altura):
Algae, an important bacterial and plant group in water ecosystems, are significant bioindicators in water quality evaluations. They are well suited for assessing water quality because of their short life cycle, fast rate of reproduction, and their nutrient needs. Algae are great determinants of the conditions in environments because they quickly respond to densities in a wide range of water conditions because of differences in water chemistry. An example is the change in the composition of genera because of the increase in acidity of water due to acid-forming chemicals that affect lake pH levels.
Eutrophic conditions are of great importance from the perspective of ecology and public health. The abundance of nutrients that contain nitrogen and phosphorus that flow into streams, lakes, rivers, and reservoirs greatly affect the water quality system. The ratio of nitrogen to phosphorus determines which algae genera are present, absent, or dominant in water systems that are affected by these nutrients. Commercial fertilizers that are utilized for agriculture and lawns, household laundry detergents, stormwater runoff, and organic pollution that includes livestock waste and leaky septic tanks are sources of these inorganic compounds. High densities of algae growth that result in algal blooms that annoy or produce toxins are evidence that lakes and reservoirs are recipients of these sources of pollution. Microscopic analysis of water samples from these bodies of water finds the density and diversity of these algal species that provide initial warning signs of degrading environmental conditions.