EC238 Lecture Notes - Lecture 6: Natural Capital, Absorptive Capacity, Economic Surplus
Document Summary
Open system a system which imports or exports energy or matter from outside, ie. economy. Closed system imports and exports energy only; mater circulates within the system but does not flow through it. Isolated system neither matter nor energy enters or exits. Difference between isolated system and closed system is that heat may not flow to and from an isolated system but it may in a closed system. We derive our energy from the sun and our plant is not closed with respect to energy. The first law of thermodynamics energy and matter can neither be created nor destroyed. Implication: the raw materials that flow into the economic system have to accumulate in the economic system or return to the environment as waste. Excessive waste can appreciate the value of the asset; when they exceed the absorptive capacity of nature, wastes reduce the services that the asset provides.
