Enviro Econ Principles Flashcards
Demand (marginal benefit curve)
Consumers desire to purchase goods and services at given prices. Demand curve tells the marginal cost of consumption
Supply (marginal cost curve)
The total amount of a specific good or service that’s available to consumers. Supply curve tells the marginal cost of production
Marginal cost
The cost added by producing one additional unit of a product or service
Marginal benefit
Additional benefit arising from a unit increase in a particular activity
Equilibrium
Point of efficiency. No externalities
Producer surplus
The difference between how much a person would be willing to accept for a given quantity of a good vs how much they can receive by selling the good at the market price. Area above the supply curve and below the market price
Consumer surplus
The difference between how much a person would be wtp for a given quantity of a good vs how much they must pay for the good at the market price. Area under demand curve and above the market price
Externalities
Source of market failure. Exist whenever the welfare of some agent depends not only on their actions but also on the actions of others under the control of some other agent
Negative externalities
An activity imposes costs on a 3rd party
Positive externality
An activity imposes benefit on a 3rd party
Pecuniary externalities
When the actions of an economic agent cause an increase or decrease in market prices
Pigouvian tax
Polluter pays. Per unit tax set to = the damage caused by the activity. External costs are paid directly by the polluting agent. Arthur pigou 1920
Property rights
A bundle of entitlements defining the owners rights, privileges and limitations for the use of a resource
Universality
All resources are owned by someone
Transferability
Property rights should be transferred to others
Exclusivity
All the benefits and costs should only accrue to the only
Enforceability
Property rights should be secure from seizure or encroachment
Scarcity rent
The producer surplus persists in the long run competitive equilibrium
Private property regimes
Individuals hold entitlements
State run property regimes
Government own and control property
Common property regimes
Property is jointly owned and managed by a specific group
Common pool resources
Characterized by non exclusivity and divisibility
The class theorem
When negotiation costs are negligible and affected parties can freely negotiate, the entitlement can be allocated by the courts to either party and an efficient allocation will result. Only the distribution of costs and benefits amoung the effective parties is changed
Efficient level of diversity
The efficient allocation max’s economic surplus, which is represented geometrically by the portion of the area under the market demand curve that lies above the constant marginal cost curve. The allocation that max’s economic surplus is Q*, the allocation where the demand curve meets the marginal cost curve
Free rider effect
Someone who derives the value from a commodity without paying and efficient amount for its supply
Monopoly
When product is sold by a single seller. Supplies too little of a good at too high a price. At the monopoly output, marginal benefits are greater than marginal costs. Net benefits aren’t max’d and there’s a deadweight loss
Cartel
Group of producers who form a collusive agreement to gain monopoly power
Rent seeking
The use of resources in lobbying and other activities directed at securing protective legislation
Positional goods
Goods and services that people value bc of their limited supply, and bc they convey a high relative standing within society
Fixed input
An input where it’s quantity can’t be readily changed when market conditions indicate that an immediate change is desirable
Variable input
An input where it’s quantity can be changed almost instantaneously in response to desired changes in output
Short run
That period during which 1 or more of the productive factors of production is fixed
Long run
That period of time in which all inputs can be changed
Production function
Schedule showing the max Amount of output that can be produced from any set of inputs given an existing tech. Output =f(labour, capital, land, mgmt)
Marginal physical product
Change in output divided by the change in input use.
Average physical product
Level of output devoured by the level of input use
Total fixed costs
Costs don’t vary with the level of output or input use. This is a short run concept bc all costs are considered variable in the long run
Total variable costs
Sun of all individual categories of production costs that do vary with the level of output or input use
Marginal cost
Change in total cost divided by the change in output
Average variable cost
Total variable cost divided by output
Average total cost
Total cost divided by output
