标题: Econ: Renewable vs Non-Renewable Resources [打印本页] 作者: clearlycanadian 时间: 2011-7-11 19:43 标题: 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?作者: MonkeyBusiness 时间: 2011-7-11 19:43
Also, thinking of land as the 'renewable resource' helps. It's renewable because you can never use it up, but there is only a finite amount of it.
Since the quantity will always be the same, the supply curve is perfectly inelastic.
But agreed. I have an econ degree and I found this concept counter-intuitive. Mind you, I never did natural resource economics.作者: ishfaque 时间: 2011-7-11 19:43
Think of it from the supplier's point of view. If you have x number of units that are non-renewable then you want to sell them when you can make the most money out of it. On the other case, for renewables you are already going to get new supply no matter what and your goal is to fix all your quantity (hence a straight line up indicating inelasticity)作者: Londonrocks 时间: 2011-7-11 19:43
I think of it the same as Sevago00. If you are selling water from a tap, and know that it will continue to pour out and never end, you will sell your entire production at whatever price you can get for it.
