Valuation Of Environmental Resources

Question 1

Types of values

Answer 1

1) Use values
- Direct
- Option value
- Quasi-option value

2) Non-use value
- Existence value
- Bequest value

Question 2

Option value

Answer 2

• The value of not destroying an environmental asset for the sake of potential future use

May not use the forest currently but the value of keeping the option of using the forest in the in the future

Question 3

Quasi- option value

Answer 3

• The value of not destroying an environmental asset for the sake of learning more about the consequences of destruction

value of preserving environment for the purpose of learning about future potential uses (medicine)

Question 4

Bequest value

Answer 4

• value of preserving environmental resource in order to bequeath it to future generations

Question 5

Instruments to deal with uncertainty and ignorance

Answer 5

• precautionary principle

- safe minimum standards

Question 6

COMPENSATING VARIATION

Answer 6

• change in income that will compensate for the increase in price
• Change in Y I need to achieve old utility with new price

Question 7

EQUIVALENT VARIATION

Answer 7

• Change in income that will be equivalent to the price increase
• Change in Y needed to achieve new utility with old price ratio

Question 8

COMPENSATING SURPLUS

Answer 8

• change in income to compensate for the changes in environmental quality
• WTP: Maximum WTP for the increase in the level of environmental quality (WTP for the change occurring)
• WTA: Minimum WTA compensation got the decrease in environmental quality (compensation for the change occurring)

Question 9

EQUIVALENT SURPLUS

Answer 9

• Change in income that will be equivalent to the Environmental quality not changing
• WTA: Compensation for the change from not occurring
• WTP: WTP for the change from not occurring