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IB SL/HL Economics Paper 1: 'Referring to the difference between common access resources and recourses purchased by firms, explain why common access resources pose a threat to sustainability.'$4.54
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Unit 1 ECON1 - Economics: Markets and Market Failure
Essay
IB SL/HL Economics Paper 1: 'Referring to the difference between common access resources and recourses purchased by firms, explain why common access resources pose a threat to sustainability.'
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Course
Unit 1 ECON1 - Economics: Markets and Market Failure
Institution
AQA
Book
IB Economics Course Book
This document contains a detailed essay taken from a past IB Economics Paper 1 Question: 'Referring to the difference between common access resources and recourses purchased by firms, explain why common access resources pose a threat to sustainability.' This essay explains the difference between pr...
Unit 1 ECON1 - Economics: Markets and Market Failure
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Referring to the difference between common access resources and
recourses purchased by firms, explain why common access resources
pose a threat to sustainability.
Common access resources are natural resources over which the is no established
private ownership. They are owned by no one and thus are available for anyone to
use. An example of a common access resource is the ocean, as water is not
owned by anyone and free for anyone to use. The difference between common
access resources and resources purchased by firms is that, unlike common access
resources, resources purchased by firms are privately owned and therefore the
manner in which they are used is different and more sustainable than that of
common access resources.
When the demand for a common access resource overwhelms the supply, the
consumption of a unit directly harms others who can no longer enjoy the benefits.
Seeing as this resource is common to all, each user is incentivised to maximise the
self gain from this resource by exploiting it. Due to a lack of price mechanism, there
is an insufficient allocation of the common resources, causing an economic market
failure known as the Tragedy of the Commons, which leads to shortages in
resources essential for humans and therefore poses a threat to sustainability. An
example of this is the overfishing of fish, like bluefin tuna in international fishing
waters such as the Mediterranean Sea. Due to the fish supply not being owned by
anyone, there is no incentive for fishermen to preserve the tuna population in the
sea in an attempt maximise their own self gain- profit. This is amplified by the fact
that such public good is non excludable but rival and will therefore result in a
destruction of these resources due to the overconsumption and under-maintenance
of this blue fin tuna population.
Fishing can also be a resource purchased by firm however- fish farms. In this
model there are property rights to the fish and therefore the owners have an
incentive to preserve the fish population for future profits. In such way the system is
far more sustainable and the fish stock is optimised due to the introduction of a
normal price mechanism which means that the fish supply can be allocated far
more effectively than when the fish are simply a common resource.
The tragedy of the commons is an economic problem that, due to its
unsustainability, impacts all humans. Earth’s atmosphere is a resource that
everyone on the planet uses and abuses through pollution and greenhouse gases,
increasingly damage this valuable, shared resource. This is causing climactic
changes that in the next century will have a great effect on our lives. Was our
atmosphere privately owned then this issue wouldn't exist as humans would have
an incentive not to damage our planet due to the self gain or profit which
emphasises the far greater extent of the threat that common access resources
pose to sustainability as opposed to resources which are privately owned.
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