Natural Resource Paradox

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Natural Resource Paradox

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University of Colorado at Boulder
Econ 3535 - Natural Resource Economics

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Lecture 5 Current Lecture Natural Resource Paradox: Methods to Counter Resource Curse: 1 government finances: saving in the boom, ameliorate the negative economic effects of the bust 2 currency stability  less volatity = less trauma 3 GDP growth  rapid growth in African countries without impediments 4 Direct foreign investment  natural resources; more service-based industries instead of natural resource extraction-based industries 5 Increase in manufacturing activity a Increase in services as well  tourism b Nigeria: formerly based on oil exports, however, now transitioning to finance, banking industries i 5.1% growth = manufacturing, construction Environment as an Asset: - cost and benefit - ex: planetary resources  mining asteroids for metal and water o platinum and other metals o estimation of 2.6 billion in revenues by 2025 Total Willingness to Pay - total willingness to pay: people who are willing to pay the market price or higher for a good or service - consumer demand curve - TC = total cost - Marginal cost = change in total cost / change in output - net benefits: subtract cost from total willingness to pay o total benefit – cost - efficiency equimarginal principle  goal = maximize net benefits Present Value Calculation: - PV = RV/(1+r) to the power of n - FV = future value ECON 3535 1st Edition

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