Ecological Economics Lecture Notes Review

A comprehensive set of vocabulary flashcards covering basic economics, laws of thermodynamics, market structures, externalities, and ecological economics goals based on the lecture series of lecture notes.

Ecological Economics

A field of study focusing on how human systems and natural systems interact, based on the Greek word "oikos" meaning household.

Economics

The study of how scarce resources are allocated to meet unlimited wants.

Positive Economics

Economics that deals with "what IS" based on facts, observation, and cause and effect.

Normative Economics

Economics that deals with "what SHOULD be" based on values, ethics, and opinions.

Adam Smith

A key figure in Classical Economics (1760–1870) known for the concept of the "invisible hand."

Invisible Hand

The process where individuals acting in their own self-interest can unintentionally create benefits for society through a self-organizing market.

1st Law of Thermodynamics

The principle stating that energy and matter cannot be created or destroyed; they can only be transformed.

2nd Law of Thermodynamics

The principle stating that energy transformations create waste and disorder, known as entropy.

Entropy

The degradation of energy quality over time, meaning resources run down and cannot be recycled perfectly.

Optimal Scale

A core goal of Ecological Economics stating that the economy must stay within environmental limits.

Just Distribution

A core goal of Ecological Economics focusing on the fair sharing of limited resources.

Efficient Allocation

The goal of using resources wisely to create the most value, shared by both conventional and ecological economics.

Porter Hypothesis

The theory that environmental regulation can encourage business innovation.

Photosynthesis

The process where plants convert sunlight into chemical energy, serving as the foundation of the food chain.

Ecosystem Service

A natural process that helps regulate the environment, such as climate regulation or water purification.

Carbon Sequestration

The natural process by which carbon is removed from the atmosphere and stored, for example, in forests or oceans.

Sources

Places where humans obtain materials and resources, such as mining ores or harvesting wood.

Sinks

Places where waste is deposited, such as landfills, oceans, or the atmosphere.

Biotic Resources

Living resources, such as forests, fish, and wildlife.

Abiotic Resources

Non-living resources, such as minerals, water, and fossil fuels.

Rivalrousness

An economic property where one person's use of a resource reduces the amount available for others.

Excludability

The ability to prevent people from using a resource; for example, private property is excludable.

Resilience

The ability of an ecosystem to recover from external shocks like pollution or climate disasters.

Law of Demand

The economic principle stating that as price increases ($P \text{ } \boldsymbol{\nearrow}$), demand decreases (Q \text{ } \boldsymbol{\text{\textdownarrow}}), represented by $\frac{dQ}{dP} < 0$.

Law of Supply

The economic principle stating that as price increases ($P \text{ } \boldsymbol{\nearrow}$), supply increases (Q \text{ } \boldsymbol{\text{\textuparrow}}), represented by $\frac{dQ}{dP} > 0$.

Market Equilibrium

The point where quantity supplied equals quantity demanded ($Q_s = Q_d$) and buyers and sellers are satisfied.

Elasticity

A measure of responsiveness to price changes, calculated as $\frac{\text{\%} \triangle Q}{\text{\%} \triangle P}$.

Elastic Demand

A situation where a small change in price leads to a large change in demand, defined as $|E_d| > 1$.

Inelastic Demand

A situation where price changes result in very little change in demand, defined as $|E_d| < 1$, common for essentials like insulin or gasoline.

Stock-Flow Resource

A resource that is used up when consumed, such as oil, minerals, or lumber.

Fund-Service Resource

A resource that provides benefits over time without being used up, such as solar energy or land.

Maximum Sustainable Yield (MSY)

The largest harvest of a biotic resource that can be maintained indefinitely without causing the population to decline.

Equimarginal Principle

The rule that consumers maximize satisfaction by allocating resources so the benefit from the last dollar spent is equal across all choices: $\frac{MU_x}{P_x} = \frac{MU_y}{P_y}$.

Law of Diminishing Marginal Utility

The principle that as the consumption of a good increases, the additional satisfaction (marginal utility) from each extra unit decreases.

Pareto Optimality

A situation where no person can be made better off without making someone else worse off.

Price Ceiling

A maximum legal price set below the equilibrium, which typically results in a shortage ($Q_d > Q_s$).

Price Floor

A minimum legal price set above the equilibrium, which typically results in a surplus ($Q_s > Q_d$).

Market Failure

A situation where markets do not allocate resources efficiently, causing society to be worse off.

Tragedy of the Commons

A market failure where individuals acting in self-interest overuse shared, non-excludable resources like fisheries or the atmosphere.

Public Good

A good that is both non-rival and non-excludable, such as clean air or national defense.

Free-Rider Problem

A problem occurring with public goods where people benefit from a resource without paying for it.

Externality

A cost or benefit imposed on a third party who is not involved in the original transaction.

Negative Externality

A situation where the social cost exceeds the private cost ($Private \text{ } Cost < Social \text{ } Cost$), leading to overproduction.

Positive Externality

A situation where the social benefit exceeds the private benefit ($Private \text{ } Benefit < Social \text{ } Benefit$), leading to underproduction.

Pigouvian Tax

A tax intended to internalize external costs by taxing harmful activities like pollution.

Coase Theorem

The idea that if transaction costs are low and property rights are clearly assigned, affected parties can negotiate to solve externalities.

Industrial Ecology

The design of industrial systems to mimic natural ecosystems, where waste from one process becomes the input for another.

Biomimicry

The practice of designing products and systems based on biological solutions, such as Velcro inspired by burrs.

Cournot Model

An oligopoly model where firms compete by choosing the quantity of output produced.

Bertrand Model

An oligopoly model where firms compete by set prices, which can lead to price wars.

Stackelberg Model

An oligopoly model defined by a leader-follower relationship where one firm moves first.

Sweezy Kinked Demand Model

A model used to explain sticky prices in oligopolies, where competitors follow price decreases but not price increases.

Total Revenue (TR)

The total money a firm receives from sales, calculated as $TR = P \times Q$.

Marginal Revenue (MR)

The additional revenue generated by selling one more unit, calculated as $MR = \frac{d(TR)}{dQ}$.

Average Revenue (AR)

The revenue per unit sold, calculated as $AR = \frac{TR}{Q}$, which always equals price ($P$).

Profit Maximization Rule

The rule stating that a firm maximizes profit at the production level where marginal revenue equals marginal cost ($MR = MC$).