AT3 Flashcards
Ecological Sustainable Development
relates to utilising our scares resources to satisfy the needs and wants of present/future generations (intergenerational quality)
Sustainable development of our resources aims to ensure
- Non depletion of non-renewable resources.
- Biological diversity
- Increased quality of life
- Decreasing our air and water pollution
- Policy makers are aware of the effects of the
government environmental decisions which are often irreversible
Externality
When a third party who was not involved in choosing to incur the cost/benefit is affected
Private Costs and Benefits
Borne or enjoyed by produces or consumers who have chosen to produce/buy the good/service
Social costs and Benefits
Borne or enjoyed by society in general, cost or benefit is rarely factored in private decisions
Merit goods
Beneficial for an individual
Demerit goods
Disadvantageous for an individual
Internalise negative externality
making the public cost (negative externality) a factor for business. Ie Taxing heavy carbon emitting businesses
Market Failure
When a market outcome is unsatisfactory to society
Environmental Issues
Environmental Issues
- Natural environments effects human’s health
- Pollution – mining and manufacturing associated with industrialisation and globalisation creates pollution
- Climate change – increasing ‘living standards’ contributes to carbon emissions
- Resource depletion -> free rider problem and “tragedy of the commons; resources are used more than socially optimal, causing market failure
Environmental destruction
A reduction of quantity and quality of natural resources (shifts PPC inwards)
Targets
renewable energy target (Australian government target policy designed to reduce emissions from greenhouse gases in the electricity sector). This has legal obligations.
Subsidies
A cash payment given by the government to lower price of a good service. Encourage the production of environmentally friendly goods/services
External Stability
External stability is an aim of government policy that seeks to promote sustainability on the external accounts so that Australia can service its foreign liabilities in the medium to long run and avoid currency volatility.
Causes of Impact to External Stability
1) Current Account Stability
- Key way to measure external stability is using CAD as a percentage of GDP
- CAD greater than 5% of GDP leads to debt accumulation that is unsustainable
2) Dutch Disease: discovery of natural resources simultaneous to increasing demand. Appreciation of currency harming other export industries
3) Changes in Terms of trade also effects external stability
4) Net foreign debt
5) Net foreign Liabilities
6) Exchange rate
7) External stability policies
Current Account Deficit - external stability
- CAD as a percentage of GDP can be used to measure external stability
- CAD averaged in Aus since GDP
- CAD greater than 5% of GDP leads to a debt accumulation that is unsustainable
Dutch Disease
discovery of natural resources simultaneous to increasing demand. Leads to appreciation of currency and thus other export industries fail.
Terms of Trade
Changes in terms of trade also indicate changes in external stability.
Prior to 2000’s, global commodity prices were falling, and our export prices / TOT was low. Low export revenue caused our growing trade deficit and a worsening of CAD
Net Foreign Debt
Net foreign debt is the total stock of loans owed by Australian’s to foreigners, minus the total stock of loans owed by foreigners to Australian’s
Net Foreign Equity
This poses less of a risk because servicing (dividends, profits) only happens when the business/asset is generating a return
Exchange Rate
Changes in the value of the dollar can make it more difficult to pay off foreign debt
Aggregate Demand
total amount of demand for goods/services within economy
- Consumption (household)
- Investment (business)
- Government (expenditure)
- Net Exports
Aggregate Supply
Total amount of goods and services (productive capacity) an economy can supply
Price increase leads to output increase (expansion in AS)
Macro-economic equilibrium - AD/AS diagram
Total output demanded = Total output supplied
