MBA712 - Economics for Managers - Assignment

Running head: ECONOMICS CASE STUDY
Economics case study
Name of Student
Name of University
Author Note

ECONOMICS CASE STUDY 2
Table Contents
Answer 1 Introduction.....................................................................................................................3
Answer 2..........................................................................................................................................3
Consequences of climate change..................................................................................................4
Market failure...............................................................................................................................9
Possible solutions to climate change..........................................................................................10
Answer 3........................................................................................................................................12
Answer 4........................................................................................................................................14
Answer 5........................................................................................................................................14
References......................................................................................................................................16

ECONOMICS CASE STUDY 3
Answer 1 Introduction
The arguments made by Sir Nicholas Stern in the United Kingdom report on climate
change got Lot of mixed reactions. Stern claimed that it is better to suffer some costs today that
are relatively modest of paying the high price of global warming in the future. The critics,
however, believe that no actions taken to limit the emission of carbon dioxide (CO2) cloud ever
amount to anything because the effects of global warming have never been substantially
explained. Although it is worth discounting both positions, the arguments by Stern are backed by
facts such as the increase in the levels of CO2 that has gone from 280 parts per million (ppm)
during the industrial revolution to 480 ppm today (Arrow, 2011). Further, the consequences of a
potential climate change are too great to ignore. Mitigating the risks of a potential climate change
at this stage is worth the incurred costs regardless of the higher consumption discount rate.
Answer 2
The emission of greenhouse gas and the associated atmospheric carbon concentration
have considerably increased during the last century. The potential effects of this event are so
catastrophic to mankind that it can only be compared to only two events, World War one and two
as well as the worst case of a nuclear explosion. However, unlike these other events, the effects
of climate change will occur progressively and will last a long time (Llavador, Roemer, &
Silvestre, 2012).

ECONOMICS CASE STUDY 4
Figure 1: Effects of Greenhouse Gases
(Pidwirny, 2006)
Consequences of climate change
There are various reasons why we are better off reducing the CO2 instead of waiting until
we start experiencing the full consequences of a potential climate change. Climate change is a
topic that most researchers and analysts find interesting, and thus, they have created various
climate change models that have calculated if the levels of CO2 go from where they are currently
at 480 ppm and reach a concentration of 550 ppm, the world’s temperature will be raised by a
minimum of two degrees. Now this might not seem alarming and that is why most people,
especially some politicians and business leaders prefer to go on with their lives and activities as
usual, however, if things continue like this, by the turn of the century the concentration of CO2
in the atmosphere would increase threefold augmenting the probability of the world’s
temperature rising to more than five degrees centigrade, a change that should not be experienced
in such a short time.