Introduction to Environmental Economics

Economics

Study of how agents make choices with scarce resources and the social results.

Scarcity

Condition where resources are limited compared to wants and needs.

Trade-offs

Necessity to choose between alternatives when resources are scarce.

Environmental Economics

Application of economics to study the environment as a resource or good.

Value of Mitigating Pollution

Understanding the worth of reducing pollution for society and the environment.

Climate Change Policy

Policies and regulations addressing climate change and its effects.

International Trade Impact

Investigating how trade between countries affects environmental quality.

Air Pollution Effects

Impacts on economy, mortality, human capital, productivity, and leisure.

PM 2.5

Fine particulate matter affecting mortality rates over different time periods.

Human Capital

The knowledge, skills, and health embodied in individuals.

Productivity

Efficiency of production measured by output per unit of input.

Leisure Choices

Decisions made regarding free time activities and preferences.

Environmental Economics Development

Emergence as a sub-field in the 1950s, influenced by John Krutilla.

Conservation Reconsidered

Landmark paper by John Krutilla that spurred the development of environmental economics.

Wealth of Nations

Seminal work by Adam Smith in economics, comparable to Krutilla's impact.

Economic Rationale for Policy

Explaining why policies are needed to address environmental issues from an economic perspective.

Market failures

Instances where the market fails to allocate resources efficiently

Policy designs

Strategies formulated to address environmental issues through regulations or incentives

Aggregate environmental quality

Overall state of the environment influenced by economic activities

Economic growth impact

Effect of economic expansion on the environment

International trade impact

Influence of global trade on environmental conditions

Market Equilibrium

Price/quantity where demand equals supply.

Consumer Surplus

Difference between willingness to pay and price.

Producer Surplus

Difference between price and production cost.

Total Surplus

Sum of consumer and producer surplus.

Efficiency

Optimal allocation maximizing total surplus.

Pareto Efficiency

Allocation where no one can be better off without making another worse off.

Pareto Improvement

Making one better off without harming others.

First Welfare Theorem

Market equilibrium is Pareto efficient and maximizes welfare.

Perfect Competition

Market structure with many buyers/sellers, no market power.

Perfect Information

Complete and accurate knowledge in the market.

Externalities

Costs/benefits affecting third parties in transactions.

Imperfect Information

Uncertainty about prices or quality affecting choices.