- A form of physical capital that tend to be replenished by nature.
- Supply is perfectly inelastic
- Demand is determined by price
Examples: water or solar energy.
Non-renewable natural resources
- Not available (for practical purposes) once they are used.
- Supply is perfectly elastic (horizontal)
- Quantity supplied is determined by demand
- Current price = Present value of the next period’s expected price, expected to increase at a rate equal to the interest rate essentially.
- Technological changes and political uncertainties are some of the many factors that make forecasting price changes difficult.
Examples: natural gas, oil, and coal.
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