ECO 292 SUMMARY

FOR MORE SUMMARY

WHATSAPP 08024665051

Economics is the study of the allocation of scarce resources among alternative, competing ends,
in the quest to satisfy human wants

Economics as a subject cannot exist in isolation (TRUE)

The structure of the environment include these

 air
 water
 land living system
 social structure

The part of the earth which contains air is called Atmosphere

The Air Environment is also called Atmosphere

The atmosphere reaches over 550 kilometre from the surface of the earth

Nitrogen gas present in the atmosphere is an essential component of plants, animals and microbe

The atmosphere contains life-supporting gasses for plants and animals

The presence of carbon dioxide and oxygen is essential for the coexistence of the basic living
systems of plants and animals

Nitrogen gas present in the atmosphere is an essential component of plants, animals and
microbes

The atmosphere is a shield that protects life on earth from the hostile conditions from the outer
spheres

A field of study that deals with weather and climate change in the environment is called
meteorology

A major layer in the atmosphere which protects human, plants and other animals from hazardous
radiation from the sun is called ozone layer

Water Environment is known as Hydrosphere

The water environment constitutes three-quarters of the planet Earth

All plants and animals on earth depend on the availability and quality of water for survival

The following are importance of water to plants and animals

 water energizes food particles

 water increases the rate of absorption of essential substances in food
 water increases the efficiency of red blood cell in collecting oxygen in the lungs
 water carries every nutrient, mineral, vitamin, protein, hormone and chemical messenger
in the body to its destination
 water is essential to the cleaning process of the body

Land environment comprises of geospheric components like rocks, soils, and other associated
constituents

The biological environment is known as Biosphere

Biosphere consists of all aspects of living systems: microorganisms, macro plants and macro
animals

There are two ways in which the biological environment is linked to other components of the
natural environment

 Dependence on atmosphere
 Dependence on Hydrosphere
 Dependence on Geosphere

Photosynthesis absorbs carbon dioxide (CO2) from and produces oxygen to the atmosphere

The biological environment requires water to survive because water is essential for all living
organisms in the biosphere

Water is transport soluble nutrients (phosphate and nitrate) that are needed for plant growth and
transportation of waste products of life’s chemical reactions

Minerals exploitation and mining activities for human survival depend on land

The land components of the natural environment is called Geosphere

The biological environment is known as biosphere

In order to impact on the four basic components of the natural environment, humans created
another sphere of the environment called ANTHROSPHERE
Biosphere creates an environment called ANTHROSPHERE

The Anthrosphere is that part of the environment that is made or modified by humans for use in
human activities

The Anthrosphere is also called the techno sphere

The following are ways that the anthrosphere has impacted on other components of the natural
environment

 Atmosphere
 Hydrosphere
 Biosphere
 Geosphere

The changes that occur in the biosphere and in other spheres (components) of natural
environment originated from human activities

Which of these chemicals deplete the earth’s ozone layer and natural defense against ultraviolent
radiation?

Chlorofluorocarbons

The water part of the earth is called Hydrosphere

The social environment refers to the combined structure involving human to human interactions

The primary group is a potent instrument in disseminating environmental education

A small or large group of individuals which members interact without emotional commitment to
one another is called Secondary group

Secondary group structure include the following

government, parties, factions, military and police, businesses and industries, media, non-
governmental organizations, professional association, labour union etc

A structure which is made up of cultural superstructure and mental superstructure (that is

conscious and unconscious motives for human behavior is called Superstructure

The natural environment is defined as physical, chemical, and biological surroundings that
comprise the Earth’s endowment of life-support systems

The natural environment includes these

  Air
 Water
 Land (the Earth’s crust)
 Living system
 Radiation from the sun

One main characteristic of the human economy is that it produces both useful commodities
(goods and services) and nonuseful materials called wastes

The by-products of an economic reconfiguration process is referred to as waste

The production of waste from any reconfiguration of natural capital is a necessary consequence
of the first law of thermodynamics

The first law of thermodynamics state that matter is neither created nor destroyed in chemical
reactions, although it may be transformed from one form to another

Wastes from production and consumption activities are absorbed by the natural environment

The limits to the rate to which materials can be recycled through the natural system is called
throughput constraint

The relationship between human economy and natural environment can be explained in the form
of a “Material Balance Models” developed by Alen Kneeze and R. V. Ayres

Alen Kneeze and R. V. Ayres proposed the Material Balance Models

The material balance model are based on the first and second law of thermodynamics (TRUE)

Materials and energy drawn from the environment are used for production and consumption
activities and returned to environment as waste

The first law of thermodynamics states that energy, like matter, can neither be created nor
destroyed, but at the same time the forms of energy can be transformed

The first law of thermodynamics is referred to as the law of conservation of matter and matter

The second law of thermodynamics is known as the law of entropy

The environment discharges the following economic functions

 The environment is the supplier of all forms of resources

 The wastes are cleaned up by the environment
 The environment maintains genetic diversity and stabilizes the ecosystem
A resource in which, when offered to people at no cost, more would be wanted (demanded) than
is available (supplied) is known as scarce resource

The opposite of a scarce resource is called free resource

At no price, the quantity supplied of a free good exceeds the quantity demanded leading to a
surplus

Scarcity reflects the fact that there are not sufficient resources (inputs) to produce everything that
individuals want

Scarcity is present in all societies whether rich or poor in as much as there is a gap between
resource need and resource availability

Scarcity is present in all societies whether rich or poor (true)

The following are economic problems involving rationalizing limited resources to satisfy human
wants

 Choice
 Opportunity cost
 Efficiency

The rationing devise for resource allocation and distribution are based on these

(a) the market system

(b) the central (government) distribution system

In the market system, price which is determined by the market forces of demand and supply
serves as the rationing instrument

When economists measure the aggregate economic performance of a given economy or a

country by the total market value of all the goods and services produced for final use within a
given period it is called gross domestic product (GDP)

Resources can be defined as anything that is directly or indirectly capable of satisfying human
wants

Resources can be classified into two: traditional economics resources and environmental
economics resources

Land refers to natural resources which are the stock of living and non-living materials found in
the physical environment and have an identifiable potential use to human begins
In Environmental Economics, it is better to say “natural resources” rather than simply “land”

Labour encompasses the productive capacity of human physical and/or mental efforts, measured
in terms of ability to work or produce goods and services

Entrepreneurship is often included under labour (true)

Capital refers to a class of resources that are man-made for the purpose of creating a more
efficient production process

Resources can also be classified according to whether they are replenishable or not (true)

Resources that are replaced by natural processes at a rate comparable or faster than their rate of
consumption by humans are referred to as Renewable Resources

All these are examples of renewable resources

 Fish
 Trees
 Wildlife
 Grazing lands

Resources for which there is no replenishment or the rate of growth is so slow as to be

imperceptible in human life span are called Non-Renewable Resources

Examples of Non-Renewable Resources include these

 Oil
 Gas
 Uranium
 Aluminum

In a market oriented economy, the majority of price and output decisions are determined in the
market through the market forces of demand and supply

The concept of demand and supply remains the most fundamental in economic analysis and
constitute the backbone of a market economy

Demand is the quantity of a commodity buyer wish to purchase at each conceivable price

Demand Schedule is a table showing how much of a given commodity a buyer would be willing
to buy at different prices
The table below illustrates a demand schedule

The Demand Curve is a graph illustrating how much of a given commodity buyers would buy at
different prices

Demand curves are usually derived from a demand schedule

The law of demand states that other things being equal, as price increases, the quantity demanded
of a commodity decreases

Utility is the satisfaction derived from the consumption of a commodity

Marginal utility is the satisfaction derived from the consumption of one more extra unit of the
commodity

The law of demand can be explained by diminishing marginal utility

When lower price increases the purchasing power of money income enabling the consumer to
buy more at lower prices without having to reduce demand for other goods and conversely, it is
called Income Effect

Substitution effect is a situation whereby a lower price induces the consumer to buy more of the
good with the lower price and less of the relatively high-priced substitutes

Market demand is the sum of individually demanded quantities at the various prices

The following are the determinants of demand for goods

 Tastes
 Number of buyers
 Income
 Prices of related goods
 Consumer expectations
A shift of the entire demand curve to the right or to the left of the initial demand curve is termed
change in demand

These are factors which can cause a decrease in demand

 Unfavourable change in consumer tastes

 Decrease in the number of buyers
 Falling income if product is a normal good
 Rising incomes if product is an inferior good
 Decrease in price of a substitute good
 Increase in price of a complementary good
 Consumers’ expectation of lower prices or incomes in the future

The change in quantity demanded refers to movement along a demand curve as a result of
changes in the price of the commodity

Decrease in quantity demanded occurs as an upward movement along a demand curve when
price of the commodity increases but other demand determinants remain constant

Increase in quantity demanded occurs as a movement downwards on a demand curve when price
falls and other determinants of demand remain constant

Supply Schedule is a table showing how much of a given commodity a seller would be willing to
sell different prices

The table below illustrates a supply schedule

Supply is the quantity of a commodity sellers wish to sell at each conceivable price

The Supply Curve is a graph illustrating how much of a given commodity sellers (firms) would
sell at different prices

Supply curves are derived from supply schedules by plotting price against the quantity supplied
with price on the horizontal axis

Supply curves are derived from supply schedules by plotting price against the quantity supplied
with price on the horizontal axis
Supply curves are derived from supply schedules by plotting price against the quantity supplied
with price on the horizontal axis

The law of supply states that the higher the price of a commodity. The higher the quantity
supplied, if all other things are unchanged

The law which states that the higher the price of a commodity; the higher the quantity supplied,
if all other things are unchanged is called law of supply

Market Supply is the sum of all the quantities of a good or serviced per period by each by ach
firm at the various prices

These factors are determinants of supply

 Resource prices
 Technology
 Taxes and subsidies
 Prices of related goods
 Producer expectations
 Number of sellers