Thurday, Sept. 8
Law of Demand: Price and quantity demanded (Qd) are inversely (or negatively) related
- as price rises, quantity demanded falls.
Law of Supply: Price and quantity supplied (Qs) are directly (or positively) related - as
Tuesday, Aug. 30
Economics of Natural Resources, Energy, and the Environment ECP 3302
Introduction to the course:
What is environmental & natural resource economics; why study it?
Economics studies the allocation of scarce resources (like land, labor, cap
Thurs., Sept 1
Economics - study of the allocation of scarce resources among alternative uses.
Resources in economics factors of production, traditionally land, labor, capital;
Used to produce goods and services that provide
ues., Sept. 6 Markets cont
1. Summary of market and nonmarket goods (from last week):
Natural monopoly goods
Common property (open access)
2. Markets - Supply and demand; equilibriu
The benevolence of self-interest
Critics of economics often accuse the discipline of viewing
people as mere optimising machines, as ethical nonentities.
The charge would be serious if it were truebut it is in fact
Dec 10th 1998
HOW can economists ex
Tuesday, Sept. 13
lasticity - Responsiveness of quantity to change in price.
a. Price elasticity of demand - % change in Qd / % change in P
Calculation of price elasticity of demand:
Use arc elasticity formula: e = (Q2 - Q1)/(Q1 + Q2)/2
(P1 - P2)/(P1
Thursday, Sept. 15
1. What do the various parts of the supply/demand diagram represent?
a. Price x Quantity = Total Revenue, or total expenditure
b. TR -Total cost = profit
c. Area under demand curve reflects benefits to demanders.
d. Area under supply cu
Tuesday, Sept. 20
Discounting - a technique for the calculation of the present value of a future stream of benefits;
the process by which benefits which are to be realized in the future are expressed in the present.
Suppose you are to decide betw
Thurs., Sept 22
From TuesdayDiscounting example
1. Efficiency conditions
static efficiency at a specific point in time, or when time is not a
dynamic efficiency - over time
n an efficient competitive market:
Property rights are clearly def
1. Efficiency conditions, cont:
n an efficient competitive market:
Property rights are clearly defined
- all resources & factors of production are privately owned
- all costs and benefits accrue to owners and users of resources
hurs., Sept 29
1. Externalities - welfare, production, or utility of one person is affected by unintended
actions or influences of another, reflecting costs or benefits that aren't recognized in a
market - common property, open access, public goods.
Equilibrium Externality problem:
Suppose that S = P = 10 + .075Q and D = P = 42 -.125 Q
Equilibrium = 10 + .075 Q = 42 - .125 Q
= .2 Q = 32; so Q = 160, and at Q of 160, P = 22
What is consumer surplus? = (42-22) * (160) * .5 = 1600
What is producer surpl
hurs., Oct 6
1. Corrective approaches to externalities and other market failures:
A. Government intervention or regulation Under what circumstances,
What are the costs?
What are the benefits?
- Direct government intervention
Tuesday, Oct 11
a. Coase theorem
Two participants: one who causes pollution, and one who is damaged.
In absence of govt regulations, the two may negotiate to reduce or eliminate
Key aspects: property rights, and transaction costs.
If neither p
Thursday, Oct 13
1. Next - Valuation of environmental and natural resources.
How do we estimate the value and cost of environmental amenities?
Environmental problems are usually a side effect of beneficial activities Travel, Electric power, Agriculture, P
note on discounting
Discounting, like its cousin, compounding, is a mathematical procedure for
expressing the value today of a sum, amount, or benefit to be received in the future
(or, in the case of compounding, the value in the future of a sum we alre
Tuesday, Oct 18
Problem sets 3 & 4
1. From last week: Valuation of natural & environmental resources
Direct use value - value derived from explicit and intended use of a beach, park, fishery,
forest, water source, etc.
Indirect (also passive or nonuse, va
What to expect on the midterm exam
The midterm exam takes place on Tuesday, Oct 25. It covers the material from the
beginning of the semester through the material covered in class and in the text through
Thursday, Oct 20. All material and topics covered i
Thursday, Oct 20
ravel cost method
Typically used to value recreational resources;
Value of recreational resource is inferred from willingness to pay to use the resource
Requires collection of survey data on:
distance of travel,
cost of travel
Thurs, Oct 27
1. Stated Preference Approaches: Contingent Valuation Method (CVM)
In these cases, economists simply ask people for their valuation. The most common
technique is contingent valuation (CV).
Environmental policy history:
Tuesday, Nov 1.
1. Value of statistical life
Key is 'statistical' life - not any individual or specific life - used frequently (to
estimate damages in court, for example).
Value of statistical life (VSL) reflects value of reduction to risk exposure: refle
(taken from Gretchen C. Daily, Nature's Services: Societal Dependence on Natural Ecosystems, 1997;
Brewer, The Science of Ecology, 1988)
absorption of precipitation
support and nourishment for plants & seeds
absorption of waste ma
hursday, Nov. 3
1. Costs of environmental regulation:
Cost Benefit Analysis
When done correctly - measurement of marginal costs and benefits of a project or
How can it be done correctly?
Use accepted economic theory and accepted procedures for es
T uesday, Nov 8
1. Continue benefit/cost analysis
What is the appropriate discount rate for environmental projects & policies with distant
(Everglades restoration, global warming)
Example: EPA's drinking water standards for lead (Safe Drink
In the past few weeks, we have discussed various standards for
environmental regulation, the use of cost/benefit analysis, and the efficiency
standard of regulation.
Here's an example of a cost benefit analysis performed by the Environmental
T hursday, Nov 10
1. Resource scarcity
Central historical issue regarding running out of resources - adequacy of resource
Or When will we 'run out of everything?'
prior to industrial revolution local shortages of food, water, basic materials;
Betting on the Planet
Tierney, John; John Tierney is a reporter for The New York Times. He is writing a book on environmental
crises. New York Times [New York, N.Y] 02 Dec 1990: A.52.
In 1980 an ecologist and an economist chose a refreshingly unacademic w
Tuesday, Nov. 15
Sustainability and capital:
What is 'capital'? class of productive resources - used to produce
various goods, services, benefits, amenities, etc, for final use or
& substitutability of human, physical, and natural capital