Question

Explain why sometimes we have to use the indirect methods to value a natural resource. Pick an example of a resource and what method would you use to value your chosen natural resou"

Answer 1

Natural resources may require indirect methods of valuation when their value is not immediately apparent or easily quantifiable, such as clean air. Indirect methods like contingent valuation or hedonic pricing can be used to determine the value of such resources.

Step-by-step explanation:

Natural resources have to be valued using indirect methods in certain situations because their value is not always apparent or easily quantifiable. One example of a resource that requires indirect valuation is clean air. While clean air is essential for human health and well-being, its value is often overlooked because it is freely available. To determine the value of clean air, indirect methods like contingent valuation or hedonic pricing can be used.

Answer 2

Indirect methods are sometimes used to value natural resources like national parks where the economic value of ecosystem services is not easily quantifiable. Economists use tools like contingent valuation or travel cost methods to estimate the willingness to pay for these services.

Step-by-step explanation:

When valuing natural resources, there are instances where indirect methods need to be used. One example of a natural resource that requires indirect valuation is a national park. In this case, the indirect method would be used to estimate the economic value of the ecosystem services provided by the park, such as recreation, preservation of biodiversity, and carbon sequestration.

The indirect method is used because these ecosystem services do not have a market price and their value is not easily quantifiable. Instead, economists use tools like contingent valuation or travel cost methods to estimate the willingness to pay for these services.

Using these methods, economists can assess the economic value of natural resources like national parks, allowing policymakers to make informed decisions about their management and conservation.