Environmental Economics and Policy 102: Natural
Resource Economics
Larry Karp
2015
Larry Karp ()
Lecture Chapter 7
2015
1 / 24
Introduction: Chapter 7
Thus far, we have developed the Euler equation, and used it for
"qualitative analysis", e.g. describing

EEP/ECON C102
Name:
Section: Mon a.m. / Mon p.m. / Wed / Fri
Professor Larry Karp
In-class exercise 1
September 10, 2015
A competive rm has 20 units of coee in Brazil, where it faces inverse demand B =
15 B . It faces iceberg transportation costs, , of se

Environmental Economics and Policy 102: Natural
Resource Economics
Larry Karp
2016
Larry Karp ()
Lecture Chapter 6
2016
1 / 20
Introduction: Chapter 6
We use models to:
Derive testable hypotheses from theories.
Conduct policy experiments.
This chapter dis

Environmental Economics and Policy 102: Natural
Resource Economics, Chapter 7
Larry Karp
2016
Larry Karp ()
Chapter 7
2016
1 / 19
The Backstop
A "backstop technology" (e.g. solar or wind power) provides a
renewable substitute for the nonrenewable resource

62
CHAPTER 4. ADDITIONAL TOOLS
4.2.2
It is optimal to leave some of the resource behind
If it is optimal to not exhaust the resource, then y1 < x1 : the resource
constraint is slack. The rm does not extract so much that marginal prot
becomes negative. If

EEP/ECON C102, Section 7
Week of October 26, 2015
This section reviews the impact of taxes in a resource model. Specifically, this section
examines how a tax affect the trajectory of price and extraction of a resource. Form simplicity,
we consider a const

EEP/ECON C102, Section 8
Week of November 9, 2015
This section reviews the basic concepts and tools for modeling renewable resources. We
will first introduce the growth function and show the difference between renewable resources
and nonrenewable resource

EEP/ECON C102, Section 11
Week of November 30, 2015
Below are the study questions at the end of Chapter 18, and the sketchy answers to them.
These questions help you understand the key points of this chapter.
1. Explain the meaning of weak and strong sust

EEP/ECON C102, Section 6
Week of October 19, 2015
This section reviews the impact of taxes in a static model. In particular, we review
the concepts of tax equivalence and tax incidence. We then use a simple example to
show how to determine whether two pol

EEP/ECON C102, Section 9
Week of November 16, 2015
This section reviews the open-access fishery. The characteristic of open access is the
zero profit. We will derive the harvest rule from this zero-profit condition. Then, together
with the growth function

EEP/ECON C102
Professor Larry Karp
In-class exercise 5
October 15, 2015
Consider a static (standard, one-period) model. Suppose that marginal cost is constant,
C, and there are no constraints on total supply. The economy is closed. (You can answer
each qu

EEP/ECON C102
Professor Larry Karp
In-class exercise 4
October 1, 2015
Consider a two-period problem. A competitive (i.e. price-taking) rm faces prices p0
y2
and p1 in the two periods and has extraction costs c(x, y) =
, where x is the stock,
10 + x
and y

EEP/ECON C102
Professor Larry Karp
In-class exercise 3
September 22, 2015
Consider a two-period problem. Demand in a period is 10 y and constant (average =
marginal) extraction cost is C = 2. A competitive rm has initial stock x0 = 2 and
discount factor =

EEP/Econ 102: Natural Resource Economics: Chapter 2
Larry Karp
Larry Karp ()
Chapter 2
1 / 25
Six topics of this chapter
Arbitrage
I discuss arbitrage over space in order to develop intuition for the
dynamic problem.
Comparative statics
We often want to k

EEP/Econ 102: Natural Resource Economics, Chapter 3
Larry Karp
Larry Karp ()
Chapter 3
1 / 13
Chapter 3: objectives
Translate techniques and intuition from the two-country trade model
to a two-period resource problem.
Obtain and analyze equilibrium condit

EEP/ECON C102
Name:
Section: Mon a.m. / Mon p.m. / Wed / Fri
Professor Larry Karp
In-class exercise 2
2015
Consider a two-period problem. Demand in a period is and extraction costs are
( ) = 10+ . A competitive rm has initial stock 0 and the discount fac

SyllabusEEP/Econ102,2015
Lectures:Tu,Thu3.305,LeConte3
Instructor:ProfessorKarp,330GianniniHall,karp@berkeley.edu
Officehours: Tuesday 10 - 11 and by appointment. Because it is not practical to have office hours that
would be convenient for all students,

EEP/Econ 102: Natural Resource Economics, Chapter 3
Larry Karp
Larry Karp ()
Chapter 3
1 / 11
The two-period nonrenewable resources problem
The rm problem is to allocate a xed stock of a resource between
s
two periods (an assumption)
This problem looks ju

Environmental Economics and Policy 102: Natural
Resource Economics
Larry Karp
2015
Larry Karp ()
Lecture Chapter 6
2015
1 / 18
Introduction: Chapter 6
We use models to:
Derive testable hypotheses from theories.
This chapter discusses the Hotelling model (

EEP/Econ 102: Natural Resource Economics: Chapter 2
Larry Karp
Larry Karp ()
Chapter 2
1 / 19
Six topics of this chapter
Arbitrage
I discuss arbitrage over space in order to develop intuition for the
dynamic problem
Comparative statics
Elasticities
Market

EEP/Econ 102: Natural Resource Economics, Chapter 4
Larry Karp
Larry Karp ()
Chapter 4
1 / 27
The plan for next few weeks
Over-arching goal: Provide a coherent framework for understanding
the incentives operating in reource markets
to understand how marke

Environmental Economics and Policy 102: Natural
Resource Economics, Chapter 5
Larry Karp
Larry Karp ()
Lecture Chapter 5
1 / 20
Goals of this lecture
Show that the methods used to study the two-period problem
generalize easily to a problem with many perio

Environmental Economics and Policy/ Econ 102:
Natural Resource Economics
Larry Karp
August , 2016
Larry Karp ()
Chapter 1
August , 2016
1 / 21
EEP/Econ 102 Natural Resource Economics
Instructor: Professor Karp karp@berkeley.edu
Your GSIs:
Molly Van Dop: m

EEP/Econ 102: Natural Resource Economics, Chapter 5
Larry Karp
Larry Karp ()
Lecture Chapter 5
1 / 26
What are we trying to achieve in this course?
We want to develop the tools that make it possible to think clearly
and precisely about these kinds of ques

SyllabusEEP/Econ102,2016
Lectures:Tu,Thu3.305,Barker101
Instructor:ProfessorKarp,330GianniniHall,karp@berkeley.edu
Officehours: Tuesday 10 - 11 and by appointment. Because it is not practical to have office hours that
would be convenient for all students,

4.2. THE PERTURBATION METHOD
61
Using this equation, we have
dg(";y0 ;x1 ;y1 )
d"
j"=0
h
@c(x1 ;y1 )
@y1
p1
@c(x0 ;y0 )
@y0
= p0
+
@c(x1 ;y1 )
@x1
i
:
Set this derivative to 0 and rearrange to obtain condition 4.5.
Example: comparing the standard method a

EEP/ECON C102
Professor Larry Karp
In-class exercise 2
September 15, 2015
Consider a two-period problem. Demand in a period is a by and extraction costs are
y
, where x is the stock, and y the extraction. A competitive rm has initial
c(x, y) =
10 + x
stoc