What do you mean by backstop resources?

The theory implies that humans need not worry about running out of resources as prices will always provide an incentive to tap into alternative resources and develop technology for efficient use of these resources. …

Why does the scarcity rent rise at the rate of interest?

The scarcity rent increases because the rapidly rising extraction cost, compared with a more slowly falling demand, causes the remaining resource to be more valuable.

What is the Hotelling model economics?

Hotelling’s law is an observation in economics that in many markets it is rational for producers to make their products as similar as possible. This is also referred to as the principle of minimum differentiation as well as Hotelling’s linear city model.

What are the characteristics of natural resources?

Resources characteristics: Resources have three main characteristics namely 1) Utility, 2) Limited availability, 3) Potential for depletion or consumption.

What are the backstop resources explain the role of a backstop resource in pricing of non renewable resource?

In the presence of a backstop, there is a ceiling on the net price of the non-renewable resource. In theory, as soon as the price of the non-renewable resource just exceeds the price of the backstop, the former will be priced out of the market and the demand would be entirely satisfied by the latter resource.

Why is the Hotelling theory important to natural resource management?

Hotelling’s theory addresses a fundamental decision for an owner of a nonrenewable resource: Keep the resource in the ground and hope for a better price the next year, or extract and sell it and invest the proceeds in an interest-bearing security.

What means Hotelling?

Hoteling (also hotelling or office hoteling) is a method of office management in which workers dynamically schedule their use of workspaces such as desks, cubicles, and offices. Hoteling is reservation-based unassigned seating; employees reserve a workspace before they come to work in an office.