 What is economics? The study of scarcity, incentives, and choices. The branch of knowledge concerned with the production, consumption, and transfer of wealth. (google)  Wealth The health, happiness, and fortunes of a person or group. (google)  Economics Models Simplified characterizations of reality that help to highlight and understand the main concepts Examples  Optimization (Profit Max., Utility Max.)  Market Equilibrium  Marginal Cost/Marginal Benefit Analysis

Quantity of Good Y Quantity of Good X Budget Constraint Equilibrium Quantity of Good X Equilibrium Quantity of Good Y Indifference Curves

Price of Good Quantity of Good

Price of Good Y Quantity of Good Y Shut Down Price Average Cost Marginal Cost P* Q*

Price of Good Y Quantity of Good Y Shut Down Price Average Cost Marginal Cost/Supply

Price of Good Quantity of Good

Price of Good Quantity of Good Supply Demand Equilibrium Price Equilibrium Quantity

 Max. Utility  Max. Profit  Min. Cost  Max. Welfare  Min. Cost of Abatement  Min. Cost of Control  How much should you study for this class?

Marginal Cost/ Marginal Benefit Time spent studying Marginal Cost Marginal Benefit Equilibrium Time spent studying 1 hr 2 hr

 Other fields of economics Health economics Financial economics International trade Industrial organization Behavioral economics  What is environmental and natural resource economics? Environmental Economics  The branch of knowledge concerned with how the production, consumption, and transfer of wealth affects the environment and consequently wealth. Natural Resource Economics-  The branch of knowledge concerned with how natural resource use affects the production, consumption, and transfer of wealth.

 How do markets “fail”?  What can we when markets “fail”?  How can efficiency in markets be improved?

 Negative Externalities - is an action of a product on consumers that imposes a negative side effect on a third party.  Examples,

Price of Good Quantity of Good Supply Demand Equilibrium Price Equilibrium Quantity

 What is the optimal use of a resource? Applications  Fisheries (optimal catch-rate)  Forests (optimal harvest)  Renewable vs. Depletable (defining)  Depletable Resources (optimal extraction)  When to transition from depletable to renewable  Recycling vs. Waste Disposal (optimal waste)

 How do we value the environment?  What is “value”?  How we measure our value of the environment?

 Why study natural resource and environmental economics? All the questions in the syllabus OR The Self-Extinction Premise  A society can germinate the seeds to it’s own destruction. Examples  Easter Island – Reliance and overuse of trees led to downfall  Mayan civilization – Pop. Growth > Food Supply

 Malthusian view – Pop. Growth can’t keep up with our use of… Oil, fish, forests, fresh water, clean air  Resources are scarce, but we will find substitutes or innovation will lead to more efficient use of the resource – “necessity is the mother of invention

 Ways to address this premise Use economic models to understand  scarcity of natural resources,  the incentives of the people using and needing that resource,  the choices of individuals. The models can inform public policies regarding the environment.  Supply, Demand, and the Market (Price Controls, Quotas)  Cost/Benefit Analysis (social vs. private)  Dynamic Optimization (Optimal Allocation of Resource use over time: Dams, Fisheries, Forests)

 Common Goods – rivalrous, non- excludable  Public Goods – non-rivalrous, non- excludable

 Natural Resource – resources that occur in a natural state and are valuable for economic activity Exhaustible, Non-renewable resources  Resources that are fixed in amount of the resource which may be used up over time.  Examples include fossil fuels, minerals such as iron, silver, and gold. Renewable resources  Resources that can be regenerated over time.  Examples,  Depletable – A renewable resource that can be exploited and depleted, such as soil and clean air.

 Resource Stock Resources that are fixed in amount  Resource Flows Resources that do not exist as a stock, are not regenerative, provide a never ending flow of services. Examples,