Topic outline

  • Session 3: Economic Techniques

    The economics tools introduced in principles of microeconomics are directly applicable to environmental issues. A central aspect of this is economic efficiency. In the last module you were introduced to the concept of the life cycle of materials which is directly related to efficiency in production and the production possibilities frontier.

    In this module the focus changes to the efficient allocation of resources across the production of many goods. We introduce the equi-marginal principle, which should look familiar under a new name. We then apply microeconomic efficiency concepts to environmental issues.

    • consumer and producer surplus
    • welfare loss
    • externalities, public goods, and common resources

    These will lead us to an environmental view of benefit-cost analysis and the lessons of the First Theorem of Welfare Economics and the Coase Theorem.

    Learning Objectives

    At completion of this learning module, you will be able to:

    • Apply basic microeconomics concepts to the analysis of environmental issues
    • Explain the equi-marginal principle and how this applies to finding the optimum level of output at the firm and sector levels and well as for society in general
    • Explain the notion of social efficiency and how it differs from market efficiency
    • Understand the issues around external benefits, especially the notion of public goods and why the market will under-produce public goods

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Session 2: Economy and Environment
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Session 4: General Model of Pollution Control and Framework of Cost Benefit Analysis