Environmental Economics

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Explain the concept of missing markets in the context of environmental goods and services.

Missing markets refer to the absence of traditional market mechanisms for buying and selling environmental goods and services. This absence makes it difficult to determine the willingness to pay (WTP) for environmental goods, as there are no established market prices to reference.

Define the hedonic model and its use in estimating the value of environmental amenities.

The hedonic model is a non-market valuation method used to estimate the economic value of environmental amenities by examining the prices of marketed goods, such as housing. It analyzes how variations in environmental characteristics affect the prices of goods and uses this information to estimate the value of environmental amenities.

What are the basic assumptions of the hedonic model?

The basic assumptions of the hedonic model include: 1. Each consumer purchases exactly one good. 2. Each good is fully described by a set of characteristics that consumers can observe. 3. Perfect competition.

Discuss the concept of implicit attribute prices in the context of the hedonic model.

Implicit attribute prices are the hidden values associated with the characteristics of a market good. For example, the impact of power plant openings on home values represents implicit attribute prices in the housing market. These values reflect how specific characteristics affect the overall value of the good.

Explain the concept of the value of a statistical life (VSL) and its significance in monetizing changes in mortality risk.

The value of a statistical life (VSL) is a concept used to monetize changes in mortality risk. It represents the monetary value individuals place on reducing the risk of fatality. The VSL is calculated using the formula $VSL = \rac{f(r,z)},{r}$, where $f(r,z)$ represents the tradeoff between wages and fatality risk, and $r$ represents the reduction in mortality risk.

Test your knowledge of missing markets and the hedonic model in environmental economics with this quiz. Learn about non-market valuation and the basic assumptions of the hedonic model. Access the quiz online for study.

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