What Is The Difference Between Appropriable Resources And Inappropriable Resources?


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Tariq Habib answered
In analyzing natural resources, economists make two key distinctions. The most important is whether the resources are appropriable or inappropriable. Commodity is called appropriable when firms or consumers can capture its full economic value. Appropriable natural resources include land, mineral resources like oil and gas and trees. In a well functioning competitive market, we would expect that appropriable natural resources would be efficiently priced and allocated.
But we must be careful not to push these results too far. A second class of natural resources, known as inappropriable resources, can definitely cause economic problems. An inappropriable resource is one whose use is free to the individual but costly to society. In other words, inappropriable resources are ones involving externalities. Externalities are those situations in which production or consumption imposes uncompensated costs or benefits on other parties.
Goods with externalities can be compared with normal economic goods. Market transactions involve voluntary exchange in which people exchange goods for money. When a firm uses scarce appropriable resources like land, oil or trees, it buys good from its owner who is fully compensated for the incremental costs of production of the good. But many interactions take place outside markets.

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