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2. Draw the demand curve for an environmental service, for example carbon sequestration (process of capture and long-term storage of atmospheric carbon-dioxide) from tree
2. Draw the demand curve for an environmental service, for example carbon sequestration (process of capture and long-term storage of atmospheric carbon-dioxide) from tree planting and discuss what its slope means as a measure of willingness to pay for the service (explain the direction of slope). Label the axes on your graphs clearly. Draw the supply curve for the service and discuss its slope and how it measures the marginal costs of providing increasing levels of the service (explain the direction of slope). Identify the price, P*, and quantity, Q*, that would satisfy the static efficiency/equilibrium condition. Label the area of net benefit to society, i.e., consumer surplus (CS) and producer surplus (PS).
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