ERE HW 1 Solution

ERE HW 1 Solution - SOLUTIONS AEM 2500 Environmental and...

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SOLUTIONS AEM 25 0 0: Environmental and Resource Economics Fall 200 9 Homework 1 10 Points (2.0 points per question). All graphs should be clearly labeled and all other work legible. If we are unable to interpret your work, you will receive a lower score. 1. This is a subjective question and we were pretty lenient on grading answers. An example of economics growth conflicting with ecological preservation can be found in most any environmental issue, for example, endangered species. There are many ways to grow in a sustainable way. For example, we might adopt sustainable forestry practices. Or, more to the point, as we will see later in the course, the economic management of fisheries promotes a higher fish stock (i.e. the number of fish in the ocean) than a “maximum sustainable yield” approach. 2. a. Graph the demand for visits to Mono Lake. Note that “demand” is formally quantity as a function of price. However, you may find it easier (as I did in creating the graph below) to map price as a function of quantity, which is technically called the inverse demand or the marginal benefit function. Demand for Visits to Mono Lake 0 10 20 30 40 50 60 70 0 20000 40000 60000 80000 100000 120000 140000 160000 180000 200000 Visits "Price"

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b. Derive an algebraic equation for the demand curve you graphed. Note, fro this problem we will used the linear formula Visits = intercept – slope*Price, which is the demand equation. By inspection of the above graph, the “visits” intercept is 180,000. The “slope” in this case is the (decrease in visits)/(increase in price per visit). Let’s examine the movement in price from \$0 to \$10 (i.e. change in price
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ERE HW 1 Solution - SOLUTIONS AEM 2500 Environmental and...

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