Final Review Flashcards
based on economic theory of supply, where does the supply curve come from?
costs:
- operations and maintenance; cleaning, repairing, staffing and law enforcement
- capital: buildings and facilities, roads and utilities
- opportunity cost of land itself
- external costs and benefits: congestion on roads
- long run vs short run
forecasting consumption:
need to compare the future benefits and costs with a proposed project to future benefits and costs without it
what do we compare when forecasting consumption:
- recreation in roadless areas is forecast to grow at 2% per year
- if designed as wilderness recreation use is forecast to grow at 5% per year
- CANNOT COMPARE THE USE BEFORE AND AFTER AND ATTRIBUTE THE ENTIRE INCREASE TO DESIGNATION, ONLY THE DIFFERENCE (3% PER YEAR) CAN BE COUTED AS A RESULT OF DESIGNATION
forecasting methods:
- informed judgements: experts use variable information
- market surveys: ask users about intended trips
- extension of past trends: prior time trends apply to future
- regression-based forecasting: estimate regression equation with historical data and use forecasted input variables
a change in a non price determinant:
shifts demand curve out
methods of analysis:
- breakeven analysis
- cost effectiveness
- BCA
- least cost method
breakeven analysis:
finds the number of users/customers needed to breakeven, linear approximation to total cost and total revenue curves
cost effectiveness:
calculate the cost per unit of outcome across alternatives, good alternative when benefits are monetary
least cost method:
minimize cost subject to an output target
- ex: 2 alternative programs to preserve bighorn sheep: look at estimated sheep protected (not benefits) and then look at ratio of cost to effectiveness
BCA
- compares social gains and social costs to determine whether an action will improve the overall well-being of society
- is a tool to assist decision-makers
BCA: how do our costs and benefits represent those of society?
-costs: include opportunity costs of society’s’ resources (inclusive of externalities)
- benefits: economic benefits to individuals in society that reflect their preferences
BCA: decision rule
- SUPPORT if benefits are greater than costs
-OPPOSE if costs are greater than benefits
optimal project size
- maximized where marginal social benefits and marginal social costs equal
—–maxed when MSB=MSC, want to operate when maximizing TC-TB (when largest gap on graph appears) - NB = diference in line (CS+PS) on graph
-requires accurate information on the benefits and costs in order to determine these curves
discounting
- we rate benefits and costs incurred in present higher than benefits/costs received in distant future (lottery dilemma)
- used to convert the future benefits and costs of a project into present value
- total discounted benefits - total discounted costs = NPV (net economic benefits of the rec project)
- discount rate of zero = we consider future and present costs to equal
discounting and NPV on graph
- the lowest line has the highest discount rate and vice versa
- higher discount rate will lower benefits relative to costs on a BCA
Benefit Cost Ratio
same as discounting benefits and costs, but over several years rather than just once
benefits vs impacts
- economic benefits: refer to CS of individual consumers of rec, economic value that one receives from participation in recreation (wildlife habitat, scenery, wilderness)
- economic impacts: economic activity generated when money is spent to participate in recreation
multipliers:
- how the money spent in an area is spread and avoids double counting
multiplier; direct effects:
- (direct effects + indirect effects) /direct effects
- total additional spending by rec visitors within the defined impact region
multiplier: indirect effects:
-impacts that ‘ripple’ through a local economy the one business’ sales increase
- affected by size of area- higher multiplier because there is more spending in that area
multiplier: leakage
- amount paid to nonlocal suppliers
climate change and outdoor recreation
- expected changes in global average temperature are rising
- changing snowfall patterns impact participation and WTP
- declining revenues and economic benefits estimates
climate and summer recreation
- wildlife activity is increasing and is expected to continue increasing because of climate change
- avoiding fire smoke and damage to natural areas changes behavior and may increase WTP
