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ECONOMICS AND THE ENVIRONMENT. HOW CLEAN IS CLEAN ENOUGH ? WHAT IS THE RIGHT AMOUNT OF POLLUTION? WHAT IS THE RIGHT AMOUNT OF RAINFOREST? WHAT IS THE RIGHT AMOUNT OF WHALES?. ECONOMIC CONCEPTS. SOCIAL GOALS ALLOCATION OF RESOURCES ALLOCATIVE EFFICIENCY COST EFFECTIVENESS NET VALUE.

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economics and the environment

ECONOMICS AND THE ENVIRONMENT

HOW CLEAN IS CLEAN ENOUGH?

WHAT IS THE RIGHT AMOUNT OF POLLUTION?

WHAT IS THE RIGHT AMOUNT OF RAINFOREST?

WHAT IS THE RIGHT AMOUNT OF WHALES?

economic concepts
ECONOMIC CONCEPTS
  • SOCIAL GOALS
  • ALLOCATION OF RESOURCES
  • ALLOCATIVE EFFICIENCY
  • COST EFFECTIVENESS
  • NET VALUE
objectives
OBJECTIVES
  • IDENTIFY ALTERNANTIVE SOCIAL GOALS IN EVALUATING RESOURCE USE
  • DEFINE ALLOCATIVE EFFICIENCY
  • EXPLAIN HOW THE “RIGHT” AMOUNT OF A PRODUCT TO PRODUCE IS FOUND, ASSUMING THE SOCIAL GOAL OF ALLOCATIVE EFFICIENCY
  • APPLY THE ALLOCATIVE EFFICIENCY CRITERION TO THE PRODUCT, ENVIRONMENTAL QUALITY
slide4
WHAT ARE THE BROAD SOCIAL GOALS THAT WE MIGHT CONSIDER AS WE DECIDE HOW NATURAL RESOURCES SHOULD BE USED?
  • ECONOMIC GROWTH
  • FULL EMPLOYMENT
  • EQUITY
  • ENVIRONMENTAL PROTECTION
  • INCOME GENERATION
  • COST-EFFECTIVENESS
  • SUSTAINABILITY
  • ALLOCATIVE EFFICIENCY
  • ENERGY EFFICIENCY
efficiency what does it mean
EFFICIENCY: WHAT DOES IT MEAN?

SUPPOSE THERE ARE TWO KINDS OF DRILL BITS THAT MAY BE USED TO DRILL FOR OIL…ONE MADE OF A SPECIAL STEEL ALLOY, THE OTHER OF DIAMONDS. THE HARDNESS OF THE DIAMONDS ALLOWS THE DIAMOND DRILL TO CUT THROUGH 10,000 FEET OF ROCK BEFORE IT HAS TO BE REPLACED. THE STEEL BIT MUST BE REPLACED EVERY 2000 FEET. THE DIAMOND BIT COSTS $2000 WHILE THE STEEL BIT SELLS FOR $300. WHICH DRILL BIT IS MORE EFFICIENT?

AS WITH EVERYTHING IN ECONOMICS: IT DEPENDS!!!

activity one answers
ACTIVITY ONE ANSWERS
  • 1, 4, 3
  • $540, $440, $360, $420
  • 3 (produces 200 units for the least cost)
  • Energy efficiency- getting the most miles per gallon
  • Cost efficiency-producing the greatest yield with fixed inputs
  • Allocative efficiency-getting the most value from resources
slide8

How far down the curve should society choose to go

if its goal is allocative efficiency?