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Economic Valuation of Natural Resources: A Study on Biodiversity and Its Monetization, Study notes of Economics

An insight into the economic valuation of natural resources, specifically focusing on biodiversity. The author discusses the challenges of bringing buyers and sellers together due to long geographical and temporal distances, and the importance of considering indirect use values and non-use values. The document also introduces various evaluation techniques such as demand curve analysis, benefit-cost analysis, and the contingent valuation method (cvm).

Typology: Study notes

Pre 2010

Uploaded on 08/18/2009

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Nikishna Myron
9/23/05
ECON 462
Notes 1.3
1. Long Geographical distances
can’t get Buyers and Sellers together
2. Temporal distances
nuclear waste emissions 1 million years from now
3. Actual Physical Manifestations
migratory birds
4. Item is not well Specified
Biodiversity
Monetize everything for comparability
Looking at incremental values of things (relative prices)
Merely metric assessments of relative values (channels)
Ambient Water Conditions considerations for cleanup
1. Recreationalist
2. Fishers
3. Fishers that eat their catch
Aesthetic values (no ugly floating solids)
Materials degrade in value over time.
Ozone degrades car tires quickly
Saltwater degrades pumping equipment quickly
Four Categories
1. UV - Direct Use value
Direct use, or consumptive
oEating a bird
Indirect use, or Non-consumptive
oWatching a bird
2. Non-Use value
EV - Existence value (Intrinsic value)
oWillingness-to-pay
BV - Bequest value
oConcern for future generations
OV - Option value
oWillingness-to-pay to eliminate futuristic risks
oPaying for time or information
pf3

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Nikishna Myron 9/23/ ECON 462 Notes 1.

  1. Long Geographical distances  can’t get Buyers and Sellers together
  2. Temporal distances  nuclear waste emissions 1 million years from now
  3. Actual Physical Manifestations  migratory birds
  4. Item is not well Specified  Biodiversity Monetize everything for comparability Looking at incremental values of things (relative prices) Merely metric assessments of relative values (channels) Ambient Water Conditions considerations for cleanup
  5. Recreationalist
  6. Fishers
  7. Fishers that eat their catch Aesthetic values (no ugly floating solids ) Materials degrade in value over time.  Ozone degrades car tires quickly  Saltwater degrades pumping equipment quickly Four Categories
  8. UV - Direct Use value  Direct use, or consumptive o Eating a bird  Indirect use, or Non-consumptive o Watching a bird
  9. Non-Use value  EV - Existence value (Intrinsic value) o Willingness-to-pay  BV - Bequest value o Concern for future generations  OV - Option value o Willingness-to-pay to eliminate futuristic risks o Paying for time or information

Total Economic Value (TEV) Willingness to pay (WTP)  Uniqueness  higher prices  Irreplaceable  higher prices  Irreversibility  higher prices  Uncertainty (potentially Irreversible) Evaluation Techniques  Getting a DEMAND CURVE  Benefit / Cost Analysis Measure Use value  Market Value = use value +portion of OV + BV Demand Curve – amount of a product that people buy based upon budget constraints. Quantity Demanded – number of items you would be willing and able to buy a product at that particular price. Inferior Good – when income increases  demand for ‘Ramen’ decreases. Substitute Good – Competition provides good for cheaper. Complementary Good – goods that go together (e.g. cheap cheese  purchase of bread) ** Won’t have to compute numbers, just label areas of the Demand Curve..! Marginal Benefit – under the demand curve (for each new item). Consumer Surplus – amount of willingness to pay vs. actual paid amount Price / unit Quantity Total Market Value Demand