《Economics from Miss Chen》Chapter 10.ppt

Chapter 10Economics and Environment 10.1 ENVIRONMENTAL PROBLEMS Reasons for Reluctance because of benefit, it is difficult to demand that people in developing countries should give up economic opportunities for the sake of the environment. because of individual freedom, governments are reluctant to tell consumers what to buy and producers how to produce. disagreement about the level of environmental damage and disagreement about the best way to limit or prevent it. Environmental Debates Views about Environmental Issues Intergenerational equity the goal of trying to make sure that future generations have access to resources and the natural would to at least an equal extent to that of current generations. environmental capital sustainable development 10.2 MARKET FAILURE AND EXTERNALITIES Market failure the situation that arises when the actions of some people adversely and significantly affect others in one or more ways. The inability of some unregulated markets to allocate resources efficiently. Externalities Externality something that result from the actions of a person or persons, that affect others who are not parties to the original action. one party undertaking an action to gain a benefit, while another party has to bear some cost associated with that action. Negative externality the cost that the other people have to carry. Positive externality without some form of intervention or market adjustment, the producers in each cases do not pay that cost. Summarize: the government can internalize the externality by taxing goods that have negative externalities and subsidizing goods that have positive externalities. 10.3 ENVIRONMENTAL POLICIES: DEALING WITH EXTERNALITIES 1. Regulation government can remedy an externality by making certain behaviors either required or forbidden. a politically, scientifically or economically optimal level of activity. 2. Tradeable Rights and Permits these could be sold at a fixed price to each of the producers or a more market orientate