Exam 2 2nd Semester
Economy
The management of resources to meet our needs in the most efficient manner possible
Sustainable Development
Meeting the needs of the present without compromising the ability of future generations to meet their own needs
Capital
Any form of wealth available for use in the production of more wealth.
ex: natural, human, manufactured, social
Capitalistic System
In Theory: Buying and selling between willing participants will bring about the greatest efficiency of resource allocation. See: supply/demand curves, adam smith
Classical Economics
a branch of moral philosophy concerned with how individual interests and values intersect with larger social goals.
Demand
the amount of a product or service consumers are willing and able to buy at various prices assuming they are free to express their preferences.
Supply
is the quanIty of that product being offered for sale at various prices.
Market Failures
“when the allocaIon of the goods or services of the free market is not efficient”… Ex: imperfect competition, not all costs are represented, imperfect information effecting transactions, principle agent problem, externalities…
Marginal Cost
Cost of producing one more unit of a product or service.
Price Inelasticity
Raising price does not necessarily reduce demand… gasoline to some degree, cigareSes, food.
The Two branches of economic thought are:
PoliIcal Economy was concerned with social structures, value systems, and relaIonships among classes (Marx…)
– Neoclassical Economics adapted principles of modern science to economic analysis… social concerns not considered
Retained emphasis on scarcity and supply and demand in determining prices and resource allocaIon.
• Growthisseenasa necessity.
• Naturalresources viewed as merely factors of producIon rather than criIcal supplies of materials, services, and waste sinks.
Growth
Is the way to maintain full employment – Is the way to avoid class conflict
PROFIT?
resource
Anything with potenIal use in
creaIng wealth or giving saIsfacIon.
– Nonrenewable resources ? Materials present in fixed amounts in the environment.
– Renewable resources ? Materials that can be replenished or replaced.
– Intangible resources ? Abstract resources such as open space, beauty, serenity etc..
Ecological Economics
Acknowledges dependence on essenIal life?support services provided by nature.
• ASempts to account for externaliIes – both social and environmental costs
• ASempts to address natural ameniIes/non economic values
Sustainability
livingontheearth’srenewable resources without damaging the ecological processes that support us all.
the Nonmarket Values
– Use ? Price to consume a resource. – OpIon ? Preserving for future. – Existence ? Even if unseen. – AestheIc ? Appreciated for beauty. – Cultural ? Important in cultural idenIty. – ScienIfic ? Experimental aspects.
Cost Benefit Analysis
ASempts to assign values to resources and social and environmental effects of carrying out any undertaking.
Discount Rates
RecogniIon that something may be worth less today than it will be in the future.
Discount rates tend to reflect the rate at which those in the economy are willing to trade present for future consumpIon
Many environmental economists take a dim view of discount rates, fearing that future damages will always be discounted in calculaIons of cost?benefit
Market Mechanisms
making externaliIes (e.g. polluIon) internal to the costs of business
Triple Bottom Line
People, planet, profit
Metrics for Evaluating the Economy
Gross NaIonalProduct(GNP)?Totalvalueofgoods and services produced by an economy (all US residents) during a year.
• Gross DomesIc Product (GDP) ? The market value of goods and services produced by labor and property in the United States, regardless of naIonality; GDP replaced gross naIonal product (GNP) as the primary measure of U.S. producIon in 1991.
• BothcriIcizedasmeasureofwell?beingbecause they do not disInguish between beneficial and harmful growth.
– Also do not account for resource deple+on or ecosystem damage.
Genuine Progress Index…
Takes into account real per capita income, distribuIonal equity, natural resource depleIon, and environmental damage.
Measuring Real Human Progress?
Human Development Index (HDI)
– Incorporateslifeexpectancy,educaIonalaSainment,andstandardof living measures.
Measuring Real progress?
Environmental Performance Index (EPI)
– Incorporatesenvironmentalhealth,airquality,waterresources,natural resources, biodiversity and habitat and sustainable energy
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