1. Are economists typically more concerned about the limits to growth imposed by environmental degradation or those imposed by resource scarcity? Explain, noting the role of negative externalities in your answer.
Economists are typically more concerned about environmental degradation than resource scarcity. The reason is that in modern economies the price response tends to alleviate the limits imposed by resource scarcity through conservation and the development of alternatives. However, because environmental degradation involves a negative externality—a cost imposed by individuals or firms on others without the requirement to pay compensation—effective government intervention is required to address it. As a result, economists are more concerned about the limits to growth imposed by environmental degradation because a market response would be inadequate.