EXAM 1 Flashcards
What is economics the study of
the allocation of scarce resources among competing ends
frontier economy
the idea that there is an endless supply of resources
spaceship economy
the idea that resources are limited and you must plan ahead
do limits on the availability of natural resources and the environment constrain economic growth
No
What is a pessimistic view of environmental economics and its impact on growth
that resources will run out and lead to economic collapse, one must halt economic growth to conserve the environment
What is a optimistic view of environmental economics and its impact on growth
greater conservation, education, and investments in innovation will save the economy from collapse
What is sustainable development
development that meets the needs of the present without compromising the ability of the future generations to meet their own needs
what is the capital approach to sustainable development
environment treated as a form of natural capital
how does “weak” sustainability differ from “strong” sustainability?
though they both treat environment as natural capital, weak sustainability is replacing the depleted natural capital with physical or human capital, while strong says the types of capital are non substitutable
provide two reasons why it’s so challenging for low-income economies to achieve sustainable economic development
explain the concept of environmental Kuznets curve, and craw on a diagram
an inverted U-shaped relationship between a variety of indicators of resource depletion or pollution and per capita income
what determines an individual’s WTP?
an individual’s income, knowledge and experience, and tastes and preferences
what causes the Demand curves to be steeper? and what causes it to shif tout?
the more necessary an item is, the steeper the demand will be. The demand will shift with a total change of WTF, like an increase of income
what determines a firm’s costs of production
the company itself and the market – how expensive the resources needed to produce are + some more
what causes the S curves to be steeper? and what causes it to shift out?
the steeper an s curve, the less adjusted to the market & the more expensive production costs. It shifts when theres a shortage/increase or abundance/decrease in price for materials or the implementation of new tech
define the efficient allocation of production at the market level
the interaction between producers na consumers in the market will lead to an optimum solution with an equilibrium price and quantity
define the efficient allocation of production at the market level
the interaction between producers na consumers in the market will lead to an optimum solution with an equilibrium price and quantity
what is the discount equation for present value?
PV=FV/(1+i)^n
what are the two key characteristics of a public good? and why is it difficult for private firms to provide public goods
nonexclusive and nonrival. because it is not defined by ownership
why may the private rate of discount differ from the social rate of discount? What are the implications
because private rates care less about the future, while social is more concerned about long run stability
what do we mean by economic values
expression of WTP for an increase or decrease in an environmental good or service - expressed in $
what are the pros and cons for putting a dollar value on nature?
pros: more efficient allocation, less misuse and overuse; cons: ethical considerations, infinite values
What are the components of total economic value? provide an example of each with reference to an ecosystem of your choice
direct use value + indirect use value + non-use value
what is the CBA rule to determine whether to go ahead with project A or B
accept the project with the highest present value net benefits
Explain and provide an example of “travel cost” valuation approach. what are the problems?
attempts to infer non-market environmental values by using the total travel and time cost that an individual incurs to visit a recreation site. Problems- people could be traveling for other reasons & it cannot indicate changes in environmental quality.
Explain and provide an example of “hedonic” valuation approach. what are the problems?
infers the value of the environmental good from another related market. Ex. housing market is surrogate for clean air. problems: statistical difficulties, choice of dependant variable, and restrictive assumptions
Explain and provide an example of “contingent valuation method” valuation approach. what are the problems?
hypothetical method in the absence of markets. surveying people directly to determine WTP. Problems: biases, systematic and hypothetical
Explain and provide an example of “valuing the environment as an input” valuation approach. what are the problems?
The environment sometimes supports or protects production activities for “free” - which is a positive externality. Ex. pollination by wild bees - supports agriculture. problems: not perfect substitutes
Explain and provide an example of “benefits transfer” valuation approach. what are the problems?
predicts WTP values for environmental quality or access change at one site based on existing data collected for a similar site. Problems: does not take into account differences in demographics for population and goods
Explain and provide an example of “benefits transfer” valuation approach. what are the problems?
predicts WTP values for environmental quality or access change at one site based on existing data collected for a similar site. Problems: does not take into account differences in demographics for population and goods
what are the 2 steps for correcting misuse and overuse of environmental resources
removing policy distortions and internalizing externalities
define and illustrate diagrammatically: Coase bargaining solution to correct an environmental externality
what is the systems approach to sustainable development
that everyone in the market is responsible to protect the environment
