002 choices and constraints

Utility

The satisfaction or happiness a person gets from consuming a good or service.

Marginal Rate of Transformation (MRT)

Measures how much of one good must be given up to produce more of another good.

Marginal Rate of Substitution (MRS)

Shows how much of one good a person is willing to give up to get more of another good while keeping the same level of satisfaction.

Income effect

Refers to how a change in the price of a good affects a person's ability to buy things, as if their income has changed.

Substitution effect

Occurs when a change in the price of a good leads people to replace it with a cheaper alternative while keeping their level of satisfaction the same.

Feasible set

The set of possible choices available to an individual given their constraints.

Opportunity cost

When taking an action implies forgoing the next best alternative action; it is the net benefit of the foregone alternative.

Economic rent

A payment or benefit received above what the individual would have received in their next best alternative.

Indifference curve

A curve showing all possible combinations of goods that provide a given level of utility to the individual.

Optimal choice condition

The point where the Marginal Rate of Substitution equals the Marginal Rate of Transformation, maximizing utility.

Scarcity

The problem of limited resources in relation to unlimited wants.

Abatement opportunities

Categories of actions taken to reduce the amount of carbon emissions.

Government incentives for abatement

Includes subsidies, information, taxation, regulation, quotas, and tradeable permits to encourage environmental protection.

Energy efficiency

The goal of utilizing less energy to provide the same service or achieve the same result.

Low-carbon energy supply

Sources of energy that produce minimal or no carbon emissions during their operation.

Technical measures for abatement

Technological innovations and solutions aimed at reducing emissions.

Behavioural changes

Adjustments in individuals' or organizations' behavior aimed at reducing emissions.

Trade-off

A situation in which one thing must be given up in order to obtain something else.