Economics and International Cooperation

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Presentation transcript:

Economics and International Cooperation Section 1 Part 2

Economics and the Environment Economics is the study of how individuals and groups make decisions about the production, distribution, and consumption of limited resources as they attempt to fulfill their needs and wants. Economists say that an economic system is successful when there is an increase in the flow of money and products within a market. Economies, however, draw resources from the environment and may return waste or cause damage. Economic systems are, in fact, contained within and dependent upon the environment.

Economics and the Environment Economists see environmental problems as market failures. The market has failed if the price of something does not reflect its true cost. For example, the price of gasoline does not reflect the expenses caused by auto emissions, such as that of the illnesses caused by air pollution, which cost society billions of dollars a year. In a balanced economic system, the price of gasoline should reflect these costs.

Economics and the Environment A complete economic model shows that economic systems operate within natural systems.

Regulation and Economic Incentives The government has tried many ways to regulate environmental damage such as pollution. Governments may also create economic incentives by paying out money for actions that benefit society.

Regulation and Economic Incentives Governments may also punishing people with fines and sentences for actions that harm the environment. However, regulations are criticized when they are difficult to enforce, do not distribute costs evenly, or do not control environmental damage.