Environmental impacts

Question 1

Name the negative environmental impacts?

Answer 1

• pollution (air, water, climate, noise)
• use of natural resources (depletion, fire hazards)
• loss of flora and fauna (disrupting habitats, vegetation, species)
• erosion (landslides).

Question 2

What are the causes of negative environmental impacts?

Answer 2

• tourism as a economic externalities > inefficient markets and negative externality
• tourism as a public good > prisoners dilemma

Question 3

Explain economic externalities?

Answer 3

An unbalance of supply and demand in the economic market causes welfare loss.

Societal costs that are not reflected in the market price.

Question 4

How can we mitigate negative economic externalities to benefit environmental goods?

Answer 4

Maximizing welfare…

…by restoring market equilibrium:

• higher consumer surplus (higher willingness to pay more than asking price)
• higher producer surplus (stretching the amount between actual cost and asking price.

…by considering societal costs in market prices.

Question 5

Explain the prisoners dilemma?

Answer 5

Overusing environmental goods as a right (free of charge).

Problem is free-ride behavior = consumption without contribution.

This will lead to deterioration of environmental goods.

Solution would be moving towards everyone contributing for environmental benefits.

Question 6

Name the positive environmental impacts?

Answer 6

Enhancing quality of environmental goods, by:

• more local investments
• higher willingness to pay.

Question 7

What is meant with the “optimal” pollution?

Answer 7

It is not welfare-optimizing to completely avoid environmental impact as avoiding it brings costs next to benefits.

So companies take measures to avoid impact, but think about the cost of avoiding.