Economics of exhaustible resources, Microeconomics

Assignment Help:

Economics of Exhaustible Resources

A resource is depletable if its stock decreases over time whenever the resource is being used. In this case the owner of the stock decides about the rate of extraction keeping in view the exhaustible nature of resource. Extraction of resources, as you can imagine, requires costs to be incurred while the extracted resources generate revenue when sold in the market. Hotelling's rule provides optimal extraction rate for such resources.

Let St represents stock at time‘t’. Et is extraction at time’t’.

Since the stock depletion at time’t’ affects availability in future periods, the stream of revenue and costs should be considered. In other words, the resource owner cannot decide for a single period independent of future periods. Given resource and cost functions, with the constraints defined by resource depletability the resource owner chooses extraction over time to maximize present value of total profit. As resources indicate a stock, which can be extracted over several periods, there is future stream of costs and revenues. Moreover, future revenues (also costs) have lower value than present revenue. Thus, future revenues and costs need to be discounted.

 


Related Discussions:- Economics of exhaustible resources

Price elasaticity, why does the quantity of education change in the privat...

why does the quantity of education change in the private universities much more responsive than salt as to changes in price?

Market structures, what are the sources of oligopoly power

what are the sources of oligopoly power

Positive and normative statement, differentiate between normative and posit...

differentiate between normative and positive statements in economics with the help of a statement

Due diligence, Due Diligence The investigative procedure an investor s...

Due Diligence The investigative procedure an investor should conduct into the operations and business strategy assumptions of an organization soliciting investors.

Formation of nitrobenzene , reaction of mechanism of nitrous acid with benz...

reaction of mechanism of nitrous acid with benzene diazonium chloride in presence of Cuperous oxide

Explain elasticity coefficient, The elasticity coefficient is a number meas...

The elasticity coefficient is a number measured using price and quantity data to verify how responsive consumers are to changes in the price of a commodity.  The elasticity coeffic

Choose a topic from microeconomics ., choose a topic from microeconomics th...

choose a topic from microeconomics that matters to you and find a recent news article covering that topic?

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd