Topic 3 - Environmental Sustainability

Question 1

What is ecologically sustainable development?

Answer 1

It is development that meets the needs of present generations while not compromising the ability of future generations to also meet their needs

It involves the preserving and enhancing of the community’s resources so that ecological processes and QOL are maintained.

It is a level of eco activity that is compatible with the LT preservation of the environment, rather than the maximum growth in the ST

Question 2

What is the long term purpose of achiving both EG and environmental protection?

Answer 2

It is to improve people’s QOL

Question 3

Why do depleted natural environments have negative effects?

Answer 3

Depleted natural environment has both harmful effects on the health of humans and diminishes their quality of life and reduces the potential future growth of the economy by limiting its natural resources

Question 4

What are the 5 key principles of ecologically sustainable development?

Answer 4

Integrating economic and environmental goals in policies and activities

Ensuring that environmental assets are appropriately valued

Managing environmental risks with caution

Ensuring fairness in the allocating of costs and assets within and between generations

Taking into account the global effects of environmental issues

Question 5

What is intergenerational equity?

Answer 5

Intergenerational equity describes the concept that resources should not be used in a way that will limit the quality of life of future generations

Question 6

What has been created to ensure ecologically sustainable development? What are the core objectives?

Answer 6

The Aus national Strategy for Ecologically Sustainable Development (NSESD) was first developed in 1992 to address this issue

Core objectives include:

To enhance individual and community wellbeing and welfare by following a path of economic development that safeguards the welfare of future generations

To provide for equity within and between generations

To protect biological diversity and maintain essential ecological processes and life support systems

Question 7

What are the impacts of overuse or exploitation of natural resources to achieve ST growth?

Answer 7

It can deplete natural resources and permanently damage the environment, reducing the productivity of affect sectors, it will also result in a fall in future potential output in the LT, especially in primary industries that rely on natural resources as inputs in the production process

Question 8

WHat is the price mechanism?

Answer 8

The interaction of the market forces of supply and demand to reach an equilibrium price and quantity of production

Question 9

Is the price mechanism a key determinant in decisions about what g+s should be provided?

Answer 9

Yes

Question 10

WHat are the downsides of using price mechanism?

Answer 10

It does not effectively take into account the LT effect of eco activity on the environment. E.g. Forests may be logged until there are none left. Thus, market price paid by consumers does not reflect social costs.

Question 11

How does the price mechanism work?

Answer 11

WHen consumers demand goods, producers will make them available, so long as they can receive a price that at least covers their prices

Question 12

What is market failure?

Answer 12

It is when the price mechanism takes into account private benefits and costs of production, but not wider social costs and benefits borne by all of society such as increased pollution contributing to an increase in CVD for individuals

Question 13

What are the other costs and benefits that are passed on to other members of society known as?

Answer 13

Externalities - a consequence of an industrial or commercial activity which affects other parties without this being reflected in market prices

Question 14

WHat is a negative externality?

Answer 14

Negative externalities refer to an unintended negative outcome of an economic activity whose cost is not reflected in the operation of the price mechanism. Generally, refers to the adverse spillover effects on the environment from eco activity.

Question 15

What are demerit goods?

Answer 15

G+s that have negative externalities are known as demerit goods

Question 16

What are positive externalities?

Answer 16

Positive externalities are unintended positive outcomes of an economic activity whose value is not reflected in the operation of the price mechanism. They are the beneficial spillover effects for society. For example, increased use of train services may reduce commuting times for passengers but also reduce road congestion and car pollution

Question 17

What are merit goods?

Answer 17

g+s which have positive externalities

Question 18

WHat is the tragedy of the commons?

Answer 18

The tragedy of the commons refers to a situation in which individuals with access to a public resource (also called a common) act in their own interest and, in doing so, ultimately deplete the resource.

Question 19

Does the price mechanism help protect the environment?

Answer 19

It plays a limited role in protecting the environment but kind of does

Question 20

How does the price mechanism protect the environment?

Answer 20

It limits the sales of depleted resources that do have a price.

When environmental resources become scarce, the cost of natural resources increase, reducing the number of resources consumed. Therefore, if a large number of trees are cut down to be sold on the market, eventually it will become more expensive to supply them. The remaining supply will be limited, and the prices will this increase due to a lack of supply

However, this approach can only protect those resources that are sold in markets, such as minerals and timber. The price mechanism plays no part in allocating environmental resources that can be used for free such as the use of the atmosphere to dispose of gases generated during the production process.

Question 21

What are non-excludable goods?

Answer 21

Goods which are once provided, the producer cannot exclude consumers from enjoying the benefit of the good even if they aren’t prepared to pay - i.e. defence, streetlights, clean environment etc.

Question 22

What are excludable goods?

Answer 22

Goods which can exclude consumers from enjoying the benefit of the good if they arent prepared to pay

Question 23

What are non-rival goods?

Answer 23

Consumption of the goods by one individual consumer does not reduce the quantity of the good available for other consumers

In other words, it is a good that can be consumed or possessed by multiple users - i.e. a park

Question 24

What are rival goods?

Answer 24

Consumption / possession of the goods by a single user

Question 25

What are public sector goods?

Answer 25

Public sector goods are goods and services provided by the gov such as train services and hospitals. However, not all public sector goods are public goods. Train services, for example, are provided by the gov but aren’t public goods as they are excludable, since train guards can prevent you from riding for free. This is also similar vice versa

Question 26

What is a public good classified as?

Answer 26

Non excludable and non rival:

It is essentially a a commodity or service that is provided without profit to all members of a society, either by the government or by a private individual or organization.

Question 27

What is a private good classified as?

Answer 27

Excludable and rival:

A private good is thus any item that can only be used or consumed by one party at a time.

Question 28

What are the 3 environmental issues?

Answer 28

Preservation of natural environments, pollution, climate change and depletion of renewable and non-renewable resources

Question 29

Why is preserving the natural environment an important environmental issue (in terms of the economy)

Answer 29

Economy cannot keep growing in LT if environment is degraded, due to restricting availability of resources

Environmental damage affects human health through higher levels of air and water pollution, and restricts the availability of resources –> worsening human capital and thus eco activity

Question 30

What are some measures to help preserve the natural environment?

Answer 30

Restrictions on development in environmentally sensitive areas, such as mining in national parks

Protecting native plant and animal species from extinction

Controls over emissions of waste products

Requiring new plantation in areas where logging has occurred

Question 31

Why is pollution an important environmental issue (in terms of the economy)

Answer 31

Pollution occurs where the natural environment is degraded in some way, such as by harmful chemical substances, noise and untreated rubbish

All sectors of the economy including manufacturing, agriculture and households contribute to the pollution of our environment

The impact of pollution is often felt far away from its original source and can be a problem for the global economy

Pollution can harm agricultural productivity –> decreased crop yield and quality. It can also increase work absences from increased sickness due to high levels of pollution

Question 32

How are governments attempting to reduce pollution?

Answer 32

Banning environmentally damaging production techniques

Quotas to restrict the emissions of harmful pollutants

Subsidies encouraging environmental practices, taxes to discourage some forms of eco activity

Question 33

What is climate change?

Answer 33

Climate change (global warming) is the impacts on the natural environment such as rising temp and sea levels caused by emissions of greenhouse gases such as carbon dioxide, nitrous oxide and methane

Question 34

What is climate change caused by?

Answer 34

Burning of fossil fuels

Changes in Land use

Also, high levels of EG will generally lead to higher carbon emissions

Question 35

What are the detrimental impacts of climate change on the economy?

Answer 35

Weather conditions becoming more extreme –> worsening agriculture

More land species become critically endangered

Malnutrition and nutrient deficiency

Reduction in Aus GDP, consumption and real wages

Permanent damage to sensitive regions in Aus such as the bleaching of the coral in the great barrier reef

Question 36

What are renewable resources?

Answer 36

Renewable resources: Renewable resources can naturally regenerate or replace themselves in a relatively short period of time. However, these resources may be depleted to the point where they become non-renewable

E.g. overfishing of a species of fish may cause the numbers to fall to a level at which the species cannot reproduce and may become extinct

Question 37

What are non-renewable resources?

Answer 37

Non-renewable resources: Non-renewable resources are those natural resources that are in limited supply because they can only be replenished over a long period of time or cannot be replenished at all.

E.g. Fossil fuels such as petroleum and coal

Question 38

What is the main issue with a depletion of resources for the economy?

Answer 38

It affects future generations (thus promoting intergenerational inequity), which reduces the ability to reach an ecologically sustainable development

Also, as resources become scarce, there is an increase in costs –> increased costs of living

Question 39

How can the optimal rate of consumption for renewable resources be obtained?

Answer 39

Renewable resources: optimal rate of use means arriving at a threshold exploitation level that allows resources to regenerate to avoid long-term decline in these resources

Involves avoiding overfishing, overgrazing, excessive farming of agricultural land, over- exploitation of timber

Question 40

How can the optimal rate of consumption for non-renewable resources be obtained?

Answer 40

optimal rate involves determining rate of use acceptable for both present generation and future generations