Environment Flashcards
(53 cards)
What is one of the biggest issues facing the global economy?
The issue is being faced now and likely also in the short to medium term and perhaps beyond is increasing concern over the state of the environment:
- global warming/climate change
- general growing concern about the quality of the environment e.g. air or river quality.
What is the concern both a changing choice of?
As to how scare resources are utilised and also a change in the quantity of scare resources that are seen to exist - consumers want more eco-friendly products e.g. sustainable water supply.
The effect of changing environmental awareness are multiple and potentially very significant for business.
What does changing patters of demand involve?
Demand for new technologies, an opportunity for some new firms?
Consumer environmental consciousness e.g. coal mines are less common in the UK as consumers are aware of major environmental effects producing it can cause, profitability decreased due to decreased demand.
Wind power has seen increased demand over coal power due to their sustainable benefits
What are rising costs of inputs?
It can be expensive to switch to sustainable methods, its more expensive today as there are having to switch methods today which is something they wouldn’t of had to do before.
e.g. Kwik Fit must charge customers to environmentally dispose of used tyres
What does the rising cost of doing business internationally involve?
Increased costs for shipping which causes environmental damage.
Impact on globalisation e.g. ships trying to implement wind-powered vessels in a boost for green shipping.
What are the implications for potential environmental disasters?
e.g. 2010 Deepwater Horizon Oil Spill in Gulf of Mexico
Implications for insurance - rising costs for those residents/business whose property i damaged, unable to work/businesses losing out on profit.
What is uncertainty and risk?
e.g. with USA climate politics, Trump not believing in climate change.
What are the further risks, costs and opportunities from government policy response?
e.g. HS2 plans announced and money was invested, government plans then changed, businesses that were involved now have less money and are struggling.
Why does market failure occur?
Sometimes the allocation of resources are often cited as a reason why government intervention is required.
What is market power? (market failure)
monopoly power exists creating a dead weight loss to society, firms gain dominance in one marketplace.
What is information? (market failure)
Consumers and firms may not know or be fully informed of the opportunities or costs associated with their decision making, but internalities can exist.
e.g. the risk of smoking, packets say the risk, but it doesn’t give enough information on tobacco effect, internalities mean that the smokers ignore the risks as they believe they wont be affected.
What is income distribution? (market failure)
a role for transfer payments. Governments try to spread income differently across society e.g. paying money to those in need such as benefits, income tax or higher earners
What are other factors of market failure?
- provision of types of good
- externalities
What are the variations in good type?
Goods mean good/services, the typical types of products that we imagine in most settings e.g. jeans, gloves, contact lenses, a cup of coffee, apples, hamburgers, bicycles, phones etc.
We define goods based on their inherent characteristics - some goods have specific characteristics that make it difficult for free markets to operate efficiently.
What is a club good?
A different type of product that is non-rival and excludable. These products do not suffer the same free rider problem as public goods as they are excludable and hence individuals can be adequately charged.
Club goods can be provided in a market based system.
Wi-fi, satellite, cable TV - not everyone can access this, must pay for their use.
What are common resources?
Another type different type of product that are non-excludable and rival. Unlike public goods, common goods get depleted as more people use them. This ca lead to a significant problem called Tragedy of the Commons.
What are public goods?
A good that is both non excludable and non rival. Given the difficulty in the private sector, providing these products, they tend to be produced by the government to make sure they are provided (in a optimal quantity).
Forced riders paying via taxation when they they don’t benefit enough for what they pay - need to minimise free riders and forced riders - a product provided by the government doesn’t make it a public good e.g. asteroid defence has a unusual property that challenges markets - challenge is that asteroid is non excludable.
What happens to people who don’t pay for public goods?
They will still be protected, it doesn’t determine whether you get the protection, success of asteroid defence systems depends on whether enough people pay.
System is non rival, it doesn’t cost more to protect another person one individual use does not diminish the benefits to others.
Many people decide to free ride on the contribution of others to the asteroid defence (want benefits but wont pay), if everyone free rides, nobody is protected.
What is the tragedy of the commons?
tendency of any resources that is rival and unowned and hence non-excludable to be overused and undermaintained.
Key issues is that an individual gets their personal benefits/costs but society as a whole face significant wider costs.
There are externalities, the result is that the common goods tends to be overconsumed.
- overfishing of the seas/specific species like cod or types of tuna
- common land is over grazed
How is the tragedy of the commons not inevitable?
cultural norms can help reduce/avoid overuse e.g. farmers would want to use their sheep to overuse fields in order to get the most yield/cattle they can.
Often a role of governments - fishing quotas, farming subsidies
What are the different types of goods?
Rival, Excludable = private goods (hamburgers, jeans, laptops)
Rival, Non-excludable = common goods (fish in the ocean, air, public goods)
Non-rival, Excludable = club goods (Wi-Fi, cable TV, Netflix)
Non-rival, Non-excludable = public goods (national defence, tornado siren, asteroid deflection.
What are externalities?
The impact of some economic activities spill over on to individuals or companies not directly involved in the activity.
These indirect impacts are what we call externalities.
These impacts can be positive or negative - they can be created from both the product and/or consumption of goods/services e.g. Beekeepers can consume honey and bees will go out and pollinate crops.
They can be thought of as existing because of the interdependence within our economic system.
What is a positive example of a externality?
vaccines protect others from spreading diseases, as well as protecting yourself.
What is a negative example of a externality?
smoking, affects yourself and others health through second hand smoke.
