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

Neutrality - features of bureaucracy, Neutrality: Bureaucracy is apoli...

Neutrality: Bureaucracy is apolitical and neutral. Prof. Frocderich mentions the following features of bureaucracy: (i) differentiation of functions, (ii) qualifications for o

Advantages and disadvantages of a monopoly market, Problem 1: i) ‘There...

Problem 1: i) ‘There is a trade-off between inflation and unemployment.' Do you agree with this statement? Justify your example using appropriate diagrams. ii) Mauritius is

Laspeyres index, Laspeyres index The Laspeyres index tells us that: ...

Laspeyres index The Laspeyres index tells us that: - The amount of money at present year prices which an individual requires to purchase bundle of goods and services which w

Summary of educational financing, Normal 0 false false fals...

Normal 0 false false false EN-IN X-NONE X-NONE MicrosoftInternetExplorer4

International development association, International development associatio...

International development association: Part of the challenge entails reorienting surveillance, the process through which the BW institutions policy advice is delivered, to mak

Components of a time series, 1-      a-  What are the five components of a...

1-      a-  What are the five components of a time series? b- Briefly explain how you would estimate each component. c- What does deterministc trend mean?  How do you detren

Poverty, Poverty: A state of having inadequate income or other resources to...

Poverty: A state of having inadequate income or other resources to support a household (or group of households) at a basic standard of living. Poverty can be measured in absoluterr

Discuss a minimum three services for older person, Mrs Holt, 85 years old, ...

Mrs Holt, 85 years old, has been admitted to acute care following a fall resulting in a fractured femur. She is a widow and lives alone with her three cats for company. a) What

Supply of labour, use a graphical illustration to briefly describe what the...

use a graphical illustration to briefly describe what the influence of an increase in immigrants would be on the market supply of labour

Please write an essay (2-2.5 pages) , Please write an essay (2-2.5 pages) b...

Please write an essay (2-2.5 pages) based on this paper You">http://www.nobelprize.org/nobel_prizes/economics/laureates/2001/akerlof-lecture.pdf You pick one over 6 macroeconomic

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