Resource Economics Flashcards
What are resources?
Anything with potential use in creating wealth or providing satisfaction.
What are the broad categories of resources we discussed in class?
- Non-renewable resources: not replenished, rate of use exceeds rate of replenishment.
Ex: oil, coal, and minerals. (is a resource that does not renew itself at a sufficient rate for sustainable economic extraction/ used faster than they are being replaced)
- Renewable resources: other organisms such as sunlight, biological cycles (dependent on seasons which provide food.)
Used at or below the rate at which they are being replaced/ renewable resource is an organic natural resources that can replenish in due time compared to the usage, either through biological reproduction or other naturally recurring processes.
What is the “Tragedy of the Commons”?
-An idea that says humans left to their vices will weed themselves out; there will be
nothing left for anyone. Any commonly held resource is invariable degraded or destroyed
because of narrowed self-interests.
- Any commonly held resources (shared by community) is invariably degraded or
destroyed.
Who proposed “Tragedy of the Commons”, and when?
Garret Hardin (1968)
How did this individual claim the tragedy could be avoided? Was he right?
Resolution:
- Giving coercive power to the Government.
Ex: They tell you can have no more than 5 sheep and 2 cows.
- Privatize resources: divide them up into yards (property).
Ex: everybody builds fences so they can have as much as they want, therefore it doesn’t
affect everyone else.
HE WAS NOT RIGHT
What are internal costs in an economic transaction?
- Internal costs are easy to see and explain. They are costs that a business bases its price on. They
include costs like materials, energy, labor, plant, equipment and overheads.
What are external costs? Who pays for each? Can you think of any examples
beyond those we discussed in class?
- External costs are costs that are NOT included in what the business bases its price on. These
include: the cost of disposing of the product at the end of its useful life, the environmental
degradation caused by the emissions, pollutants and wastesfrom production, and the cost of
health problems caused by harmfulmaterials and ingredients.
Resources are limited
Want vs. Afford Afford now vs. afford long term Transaction Matter → transaction → product What is the charge Energy → transaction → waste Minimizing costs
*Increasing the price of the product will lower waste product (external) and waste is internalized. Increasing product price will ensure proper waste management.
Internalize more costs and charge more Internal
matter –> Economic transaction–> product
energy –> Economic transaction–> Waste
*it is in a corporations’ best interest to externalize cost so they keep their profits high and product cheap.
