Briefly explain why a rise in national production and income per capita might improve some environmental problems such as air pollution, water pollution, and sanitation, and potentially worsen others.

Question

What will be an ideal response?

Answer 1

POSSIBLE RESPONSE: For some issues, the benefits of better environmental quality are so large that the income effect is dominant over almost the entire range of income per person. That is, the demand for better environmental quality as income rises is larger than any adverse effects of rising production and consumption. A clean environment is a normal good, so as incomes rise the demand for the good rises. As incomes rise people demand more of a clean environment. Higher incomes can lead to more pressure on governments to enact tougher environmental protection laws and regulations. Examples of environmental problems that tend to decline with rising incomes are concentrations of heavy urban air particulates, unsafe drinking water, and basic sanitation in urban areas. For other issues, however, environmental harm may actually rise as income per person rises. This is the case when the benefits of actions to prevent environmental harm are less than the adverse effects on rising production and standards of living. An example of an environmental problem that tends to increase with rising incomes is carbon dioxide emissions per person, which is primarily the result of burning fossil fuels.