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FundamentalsofEnvironmentalEconomicsWeiqiCHEN（陈伟琪）EnvironmentalScienceResearchCenterXiamenUniversity•Chapter3BenefitsandCosts,SupplyandDemand•Chapter4EconomicEfficiencyandMarkets•Chapter5TheEconomicsofEnvironmentalQualitySECTION2:ANALYTICALTOOLS•Thissectioncoverssomeofthebasicideasofeconomicsandoftheirapplicationtoenvironmentalmatters.•thepurpose:todevelopasetofanalyticaltools------usetofocusonissuesofenvironmentalqualityChapter3BenefitsandCosts,SupplyandDemand•Inthischapterwecovercertainbasictoolsofmicroeconomics------useinanalyzingenvironmentalimpactsandpolicies•Akeyaspectofaneconomicapproachtodecisionmakingistheevaluationofthebenefitsandcostsofanyaction.•economicactions,includingenvironmentalactions------havetwosides:createvalueencountercosts•evaluate/trade-offsWILLINGNESSTOPAYDemandAGGREGATEDEMAND/WILLINGNESSTOPAYBENEFITSCOSTOpportunityCostCostCurvesTheShapesofCostCurvesTECHNOLOGYTHEEQUIMARGINALPRINCIPLEMARGINALCOSTANDSUPPLYWILLINGNESSTOPAYThevaluesideofouranalysisisbasedonthefundamentalnotion:------individualshavepreferencesforgoodsandservices;givenachoicetheycanexpresspreferencesforonegoodoveranother,oronebundleofgoodsoveranotherbundle•Thevalueofagoodtosomebodyiswhatheiswillingtopayforit.•howmuchapersoniswillingtopaytoobtainsomegoodorservice,orsomeenvironmentalasset------it’spartlyaquestionofindividualvaluesexamplestheCanadianRockiessacrificealotaquietlivingenvironmentthehabitatofuniqueanimalspeciesthehabitatofuniqueplantspeciesGoldengatebridge•aperson'swealthaffectstheirwillingnesstosacrifice;themorewealthyapersonis,thebettertheycanaffordtopayforvariousgoodsandservices.•Willingnesstopay,inotherwords,alsoreflectsabilitytopay.•Let'sconsiderthewillingnesstopayofapersonforaparticulargood.•Assumethatthepersonhasnoneofthegoodtobeginwith.•askorperhapsdeducefromwatchingherspendhermoney----howmuchshewouldbewillingtopayforasingleunitofagoodratherthangowithoutFig.1TheConceptofWillingnesstoPayWILLINGNESSTOPAY38261712$UnitsoftheGood▼▼▼▼•peoplecanconsumefractionsofitemsinadditiontointegervalues------asmoothlyshapedwillingness-to-paycurve▲•Thesenumbersdepictafundamentalrelationshipofeconomics:thenotionofdiminishingwillingnesstopay.•Asthenumberofunitsconsumedincreases,thewillingnesstopayforadditionalunitsofthatgoodnormallygoesdown.▲Exceptionalcircumstancesstampsubmachinegundrugaddictreputedcommodity•Marginal（边际）isthusawordthatdescribestheadditionalwillingnesstopayofapersonforonemoreunit.•weneedtomakeadistinctionbetweentotalandmarginal•Ifthepersonhastwounitsofthegood,hewanttopay$17forathirdunit------themarginalwillingnesstopayforthethirdunit▲•thetotalwillingnesstopayforagivenconsumptionlevel•atalevelofthreeunits------thetotalwillingnesstopayis$8l($38forthefirst+$26forthesecond+$l7forthethird)▲•a+bDemand•Thereisanotherwayoflookingatthesemarginalwillingness-to-payrelationships.------demandcurves•Anindividualdemandcurveshowsthequantityofagoodorservicethattheindividualinquestionwoulddemandatanyparticularprice.•需求即有支付能力的需要•marginalwillingnesstopay/demandcurve•Forexample,supposeapersonwhosemarginalwillingnesstopay/demandcurveisshowninbottompartofFigurelisabletopurchasethisitemataunitpriceof$l7.•Thequantityhewoulddemandatthispriceisthreeunits.•Anindividual'sdemand/marginalwillingness-to-paycurveforagoodorserviceisawayofsummarizingtheirpersonalconsumptionattitudesandcapabilitiesforthatgood.•tastes•preferences•Incomes•Fig.2TypicalDemand/MarginalWillingness-to-PayCurves▼▼•tastes/preferencesdependonalotoffactors:psychologicalandhistoricalfactorsexperiencesinformation•Fig.2(b)------thesameconsumer's▲demandcurveforagood•before/afteroutdoorwildernessexperiences•afooditemafter/beforeanannouncementofthepresenceinitofpesticideresiduesFig.2(b):▲------Thedifferentconsumer'sdemandcurveforagood------thesameconsumer'sdemandcurvefortwodifferentgoods•demandcurves------curvilinearlinesratherthanstraightlines•Astraight-linedemandrelationshipwouldimplyauniformchangeinthequantitydemandedasitspricechanges.•Formostgoods,however,thisisunlikelytobetrue.water•atlowpricesandhighratesofconsumption;athighpricesandlowquantitydemanded•ademandrelationship------convextotheorigin------relativelyflatatlowpricesandsteepathigherprices•Individualdemandcurvesindeedsummarizetheattitudesofsingleindividuals•individualsmakedecisionswithonlythemselvesinmind?•Somepeoplemayindeedactthisway.•Butformosttherearemanyotherpowerfulmotivesthataffecttheirdemandsfordifferentgoods,includingaltruismtowardfriendsandrelatives,feelingsofcivicvirtuetowardtheircommunities,asenseofsocialresponsibilitytowardfellowcitizens,andsoon.•Individualtastesandpreferencesspringfromthesefactorsaswellasfrommorenarrowconsiderationsofpersonallikesanddislikes.AGGREGATEDEMAND/WILLINGNESSTOPAY•Whenweexaminereal-worldissuesofenvironmentalqualityandpollution-controlpolicy,wenormallyfocusourattentiononthebehaviourofgroupsofpeopleratherthansingleindividuals.•Ourinterestisinthetotal,oraggregate,demand/marginalwillingnesstopayofdefinedgroupsofpeople.•Anaggregatedemandcurveisthesummationofanumberofindividuald