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12 Cards in this Set
- Front
- Back
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Rate of Time Preference (R)
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The discount Rate applied to benefits recieved in the future to determine their present value
Rate of Time Preference/Discount Rate: R Present Value: PV Future Value: FV FV=PV(1+R) PV= FV ---------- (1+R)^yrs |
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Rate of Time Preference=10%
First Period Benefits=$950 Each Period=$500 Second Period Benefits=$1,040 What are the Present value's of each? |
First Period is the Present so it is still $950
Each Period PV=$500 ------------- = $454.50 (1+.10) Second PV $1,040 =------------ = $945.40 (1 +.10) |
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Discount Rate or (R)
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used to adjust anticipated future payments and receipts to present value terms.
-Discount Rate Selection is not straightforward |
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Gross Domestic Product (GDP)
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-is the final value of goods and services produced within a country during a given period
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Defensive Goods and Services
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-purchases made in response to the spoils of economic growth
-pollution, congestion, and work-related anxiety are a few examples -increased expenditures on environmental degradation indicate that society has suffered losses |
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Capital Depreciation
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-occurs whenever the value of capital erodes during the production process
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Environmental Sinks
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-The environment's ability to absorb additional pollution
-similar to capital depreciation |
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Utility-Justified Goods and Services
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-involve their own subjective trade-offs between the benefits of consumption and employment, and the cost o resource depletion and environmental degradation (most goods and services fall into this category)
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Environmentally beneficial goods and services
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-provide employment and utility with no net loss, or a net gain, to the environment
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Suppose that an expenditure today of $150,000 on insulating layers to prevent toxic landfill seepage would eliminate $1million worth of health costs 20 years from now. If the social discount rate were 10 %, would society be willing to spend the $150,000 today?
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1,000,000
--------------= 149,253 not as beneficial (1+.1)^20 |
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Why is GDP not a good measure of social welfare?
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Because it does not subtract the values of capital depreciation and "defensive expenditures" on pollution, nor add nonmarket production, and include a measure of income distribution....
1)Defensive goods and services 2)capital depreciation 3) National income 4)nonmarket production are all reasons why GDP is not a good form of social welfare measurement |
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Clasify the Following pollutants as uniformly distributed, concentrated, or nonuniformly distributed
a. belching (and other CO2 emissions) from cattle b. Noise Pollution from rock band rehearsals c. Emissions from paper manufacturing plants |
a.
b. c. |
