Economics Study Set 20

Business

Quiz 40 :

The Question of Resource Exhaustion.

Quiz 40 :

The Question of Resource Exhaustion.

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If the world were about to run out of a highly valued resource, what would happen to its price? How would this affect the future supply of the resource relative to demand?
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For many years it has been said that the society is running out of natural resources. With the advent of new technology and increasing rate of population, the use of these resources will grow faster; leading to the sooner depletion of these resources. This will bring what is popularly called "the doomsday".
One important fact about these resources is that, they are all marketed goods. The demand and supply are market driven and price sends the signal about the scarcity and availability of these resources. If the resources becomes scarce and supply of these resources decreases, by the mechanism supplier will find it costly to supply one additional unit of the product at the current market price. The price of the resource will increase and the invention of new technology will be encouraged. The consumer will use these resources efficiently and consume less of it. Both the supplier and the demander will search for substitutes and eventually the supply of these resources will increase in the long run.

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"If China and India continue their economic expansion, the world cannot provide enough raw materials without terrible shortages worldwide." Evaluate this statement.
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For many years it has been said that the society is running out of natural resources. With the advent of new technology and increasing rate of population, the use of these resources will grow faster, leading to the sooner depletion of these resources. This will bring what is popularly called "the doomsday".
The economic expansion of countries like China and India will increase the demand for resources. Being limited in supply, the resources would divert from smaller countries to these larger countries like China and India because of high demand. As a result, there would be a supply crisis in other parts of the world.

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In the industrial nations, have succeeding generations, each with a higher income than before, left the world resource-poor, with only low-grade mineral ores left, for example? Have they been "consuming the birthright" of future generations? Explain your answer.
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For many years it has been said that the society is running out of natural resources. With the advent of new technology and increasing rate of population the use of these resources will grow faster; leading to the sooner depletion of these resources. This will bring what is popularly called "the doomsday".
As each generation will have smaller resources for their consumption, there will be strong incentive to use and consume these resources more efficiently than before. These will provide the incentives to develop and introduce better technology and greater use of the available resources. As every generation will reap the benefit of better innovation, economy will grow towards prosperity with each generation.

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Why have cotton fields retreated and forests returned in many areas of the southeastern United States? With fewer acres farmed, will the nation continue to be able to provide food and fiber for itself? Explain.
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"Water is a necessity of life. It should not be bought and sold, or traded in markets!" Use the economic way of thinking to evaluate this statement.
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