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Econ: Renewable vs Non-Renewable Resources
Apparently, the supply curve for renewable resources is perfectly INelastic while that of non-renewable resources is perfectly elastic. That makes no sense to me because I would think the opposite would be more intuitive.
The explanation in Schweser for this difference is because the amount of available non-renewable resources, or "known stock," tends to increase over time as technology changes and more discoveries are made, in spite of the supply being finite at any single given point in time. Based on the "hotelling principle," the passage goes on to say that equilibrium prices rise based on the risk-free rate (as countries invest more if the price increase in non-renewables is less than RFR and vice versa). Schweser goes on to say that renewable resources are fixed, so supply is "independent of price" and thereby perfectly inelastic.
Sure, I can just memorise and move on. But that just seems @$$-backwards to me. I thought the whole *point* of renewable resources was that they were *not* fixed in ways that non-renewables are limiting.
Any thoughts from the Forum? Does anyone have a better way to explain this? |
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发表于 2011-7-11 19:43
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