Environmental Economics

Chapter 2-1: Economics

Multiple Choice

The environment contains

• living things only

• nonliving things only

• both living and nonliving things

• only artificial things

Multiple Choice

Which of the following is not an example of a natural resource?

• Coal

• Timber

• Sunlight

• Plastic

Multiple Choice

True or False: Environmentalism is the study of how the natural world works, how our environment affects us, and how we affect our environment

• True

• False

Case Study: The Tijuana River

• Travels through both Mexico and California

• In Mexico, it is bordered by villages, farms, and factories

  • All have runoff that enters the river and travels into the Pacific through California

  • Pollution from Mexico significantly impacts the residents of California when beaches have to close

• The United States has installed treatment Facilities on its side of the border, but they struggle to keep up with the amount of pollution in the water

  • These facilities are very expensive to install and maintain

Open Ended

What does the word Economics mean to you?

What is Economics?

• Economics: The Study of how resources are converted into goods and services

  • Goes beyond just money and involves human behavior and daily wants and needs

  • Goods: manufactured materials and products that individual consumers and businesses buy

  • Services: the work that someone or a company does for others as a form of business

Types of Economies

• There are three broad categories of economy

  • Centrally Planned Economy: The government alone decides what/how items are made and how they are distributed

  • Free Market Economy: Individuals decide what/how items are made and how they are distributed

  • Mixed Economy: Both the government and individuals play roles in making decisions

    • Most modern economies are Mixed

Supply and Demand

• Supply: The amount of a product/service available

• Demand: How much people will buy at a given price

• The two work together to reach an equilibrium

  • When Supply is high and demand low, prices are cheaper

  • When Supply is low and Demand is Low, Prices go up

  • When both supply and demand are low, prices tend to be right in the middle

Cost-Benefit Analysis

• A method used to make decisions in economics

• Looks at an action and compares what is being sacrificed (the cost) to what is being gained (the benefit).

  • Example: Your car breaks down. You can repair the malfunctioning part or get a new car.

• Can be controversial because not all costs or benefits can be easily defined

Multiple Select

Select all of the aspects that make up economics.

• Goods

• Services

• Money

• Human Behavior

Match

Match the following economies to their descriptions

• Centrally Planned

• Free Market Economy

• Mixed Economy

government alone decides what/how items are made and how they are distributed

• Individuals decide what/how items are made and how they are distributed

Both the government and individuals decide what/how items are made and how they are distributed

• government alone decides what/how items are made and how they are distributed

• • Individuals decide what/how items are made and how they are distributed

• Both the government and individuals decide what/how items are made and how they are distributed

Multiple Choice

If a nonrenewable resource such as oil suddenly became scarce while the demand remained constant, what would happen?

• The equilibrium price would increase

• The Equilibrium Price would decrease

• The Demand would increase

• The Demand would Decrease

Economies and the Evironment

• All Economies depend on the environment for production

  • Are mostly categorized as goods, even if they are intangible

  • Ecosystem services: processes performed by nature

    • Water/nutrient cycles, Air purification, etc

Economic-Environment Relationships

• Economic activity can impact the environment in several ways

  • pollution

  • Depleting resources too quickly to be renewed

• Damage to the environment can harm the economy

  • The tourism industry is most affected

  • Destruction of a resource can cause failure in production

Economic-Environment Relationships

• Some aspects of the environment are traditionally not considered in cost-benefit analysis

  • People don't think about a beautiful view when they are struggling to survive

• If the analysis is only focused on the immediate effects, other economic factors are forgotten

  • Internal Costs: Affect the immediate people involved

    • The Buyer and Seller

  • External costs: Affect the parties outside of the buyer and seller

Internal vs External Costs and Benefits Example

• When pollution in the Tijuana River is too high, the factories and consumers do not face an immediate loss

• Beaches close down which stops tourists from coming to visit

  • Hotels, restaurants, shops, and the rest of the local economy may struggle

Multiple Choice

This type of cost includes not just the buyer and seller, but other people as well.

• Internal cost

• Environmental Cost

• External Cost

• Economic Cost

Multiple Choice

True or False: Economic activities affect the Environment.

• True

• False

Multiple Choice

True or False: The Environment affects economic activities

• True

• False

Multiple Choice

In general: Which industry is most affected by environmental damage?

• Electronics

• Medical

• Architectural

• Tourism

Economic-Environment Relationships

• Planning often only looks at short-term costs and benefits

  • Many times we may not have the scientific knowledge to even consider long terms effects

• Most Resources are non-renewable, and can be impacted by continued growth

  • The question is can technology keep up with demands

Economics and Sustainability

• Ecological Economics: a field of economics that applies the principles of Earth's Systems to economics

  • Include complex relationships between both living and nonliving things

  • Strive for a perfect balance of inputs and outputs

    • The Economy does not grow or shrink but stays balanced

Economics and Sustainability

• Environmental Economics: Argues that economies can become sustainable if environmental challenges are addressed

  • Requires four things

    • Assigning Market Values

    • Addressing Market Failures

    • Changing Consumer Values

    • Corporate Responses

Assigning Market Values

• Non-Market Values: values not included in the price of goods and services

  • Many ecosystem services are non-market values and tend to be forgotten about or exploited

  • Includes things like Aesthetic Value, Cultural Value, and Scientific Value

• Environmental economists try to put a value on these values to preserve them

  • Example: How much are you willing to pay to have a clean beachside view?

Address Market Failure

• Market Failure: an outcome of not reflecting the full costs and benefits of actions

  • Example: A factory emits smoke that is carried downwind. by a storm to a forest and poisoning the water supply.

    • Usually, the factory is not held responsible as it was out of their control, but other people still have to pay the cost

  • Policies now try to incentivize companies to maximize the ability to prevent pollution

Consumer Values and Corporate Responses

• Sustainable production can be expensive to implement

  • Companies can bankrupt themselves if they make changes that lose too much money

• People can influence a company through their purchasing decisions

  • If people are more likely to buy a sustainable product, companies are more likely to use sustainable practices that would otherwise be too expensive to implement

Drag and Drop

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Placeholder

Economics argues that all economies can become sustainable as long as they address environmental challenges

Drag these tiles and drop them in the correct blank above

Environmental

Ecological

Free-Market

Mixed

Centrally-Planned

Consumer Values and Corporate Responses

• Ecolabelling: A method used by companies to tell consumers what processes are used in the manufacturing of a product

Multiple Choice

Aesthetic Value, Cultural Value, and Scientific Value are often examples of what economic term?

• Non-Market Values

• Costs-Benefit Analysis

• Market Failure

• Ecolabeling

Multiple Choice

Which type of economics strives for a stable, non-changing economy?

• Environmental Economics

• Ecological Economic

• Free Market Economics

• Mixed Economics