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Lecture 2

ECON 225 Lecture 2: Econ 225 Chapter 2

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Economics (Arts)
ECON 225
Guillaume Lord

Econ 225 Chapter 2  Natural capital is the stock of natural and environmental resources that sustain out ecosystems, economy and well-being of our residents. 3 components: 1. Natural resource capital-stocks of renewable and nonrenewable resources (minerals, forests, energy) 2. Ecosystems of environmental capital-systems that provide essential environmental goods and services such as our atmosphere and waste assimilation provided by forests, grass and wetlands 3. Land  Used because it merges key element from economy and the natural environment. Natural capital…  Has a store like value.  Capable of producing goods and services (food, motor vehicles, electricity)  Depletable-if not enough reinvestment in sustaining capital stock  Using natural capital for people has 3 effects: 1. Draws down stock leaving less for tomorrow 2. Residuals (waste) occurs as a result 3. These waste products may further degrade the quality and quantity of remaining stock  Natural resource economics is the study of how to efficiently extract or harvest the use of natural capital inputs over time  Natural capital inputs comes from renewable and non-renewable resources  Biological diversity is vital to survival of all species  Distinguishing factor of natural resources is that they are heavily time dependent  Intertemporal-involve trade-offs between today and the future. (ex: how much petroleum should be pumped from a deposit this year, realizing the more we pump now the less will be available in future years)  Assimilative capacity-the ability of the natural system to accept certain pollutants and render them as benign or in offensive.  Environmental Economics- examines the waste products or residuals from production and consumption and how to reduce or mitigate the flow of residuals so that they have the least damage on the environment and depletion of natural capital.  Humans disrupt the environment through habitat disruption  TO REDUCE RESIDUALS 1. Reduce the quantity of goods and services produced -some promote ZPG (zero population growth) as a way of reducing output -ex: Canada, amo
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