24 Questions
What is the environment referred to as in the context of the economy?
A thermodynamically closed system
What is one of the functions of the environment to the economy?
Source of resource inputs
What is the result of production in the economy-environment system?
Both waste inserted into the environment and addition to the human-made capital stock
What is the economy located within?
The natural environment
What is involved in the economy-environment system?
Production, consumption, and environmental processes and services
What is the environment referred to as in terms of matter?
A closed system
What are the environmental functions that interact with one another?
Resource inputs, amenity services, waste reception, and life support services
What is a possibility in the economy-environment system?
Substituting reproducible capital for natural capital
What is the Environmental Kuznets Curve (EKC) similar to in terms of its pattern?
An inverted-U relationship similar to the hypothesis by Kuznets on income inequality
According to the World Development Report 1992, what is the assumption behind the view that greater economic activity hurts the environment?
Static assumptions about technology, tastes, and environmental investments
What is the equation that represents the view that per capita emissions increase linearly with per capita income?
e = αy
Which of the following countries are likely to be on the left-hand curve of the EKC?
China, India, and many countries in Latin America and Africa
What is a limitation of the EKC hypothesis?
It does not account for local institutional reforms and market-based incentives
What is a criticism of the EKC hypothesis?
It is too simplistic and does not account for other factors affecting pollution
What is an alternative explanation for reductions in pollutants?
Local institutional reforms, market-based incentives, and empowerment
What is a potential consequence of the EKC hypothesis for countries like China, India, and many countries in Latin America and Africa?
Increases in income will create more rather than less pollution in the near future
What is the primary distinction between stock resources and flow resources?
The level of current use affects future availability of stock resources, but not flow resources.
What is the main difference between the traditional economic system and resource economics?
The inclusion of natural resource input in resource economics.
What is the primary goal of moving towards a more sustainable society?
To understand the interactions between the economy, community, and environment.
What is the primary consequence of poverty?
Physiological deprivation and lack of access to economic resources.
What is the role of Mi in the environmental economics production function?
Representing the flow of waste arising from the ith firm's activity.
What is the primary characteristic of the environmental economics production function?
It includes waste output as a factor of production.
What is the primary difference between the traditional economic system and environmental economics?
The inclusion of waste output in environmental economics.
What is the primary goal of environmental policy?
To reduce environmental pollution and promote sustainability.
Study Notes
Economy and Environment
- Economic activity takes place within the environment and is part of the earth's system, which receives inputs of solar radiation.
- The economy involves production and consumption, which draw upon environmental services, and production gives rise to wastes inserted into the environment.
Environmental Functions
- The environment provides four functions to the economy:
- Source of resource inputs
- Source of amenity services
- Receptacle for wastes
- Provides life support services
- These environmental functions interact with each other in various ways and may be mutually exclusive.
Substitutability of Natural and Reproducible Capital
- There exist possibilities to substitute reproducible capital for 'natural capital'.
Environmental Kuznets Curve (EKC)
- The EKC is an inverted-U relationship between pollution concentrations and per capita real GDP.
- The EKC hypothesis states that pollution initially increases with economic development, but eventually decreases as income rises.
- Not all pollutants follow the EKC pattern, and some scholars argue that the EKC relationship is not a general metaphor for the relationship between income and sustainability.
Resource Economics
- Resources can be classified into stock resources and flow resources.
- The difference between the two lies in whether the level of current use affects future availability.
Production Function Specifications
- Microeconomics classical production function: Qi = fi (Li, Ki)
- Resource economics production function: Qi = fi (Li, Ki, Ri)
- Environmental economics production function: Qi = fi (Li, Ki, Mi)
- Extended environmental economics production function: Qi = fi (Li, Ki, Mi, A) with ambient pollution
Explore the interdependence between the economy and the environment, and how economic activity affects the natural environment. Learn about the two-way relationships and sustainability in environmental economics.
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