Reference no: EM133243186

Assignment:

It is all about The Black Rhino.

The black rhino is one of the most endangered species on the planet. In southern Africa in 1970 there were 65,000 Black Rhinos. Now there are only 2,500. Basic economics tells us why they are in trouble and what we can try to do about it.

Why do people kill the black rhino?

Because they can make a lot of money relative to the risk of getting caught - just like drug trafficking and lying on your taxes. In Asian communities the horn is viewed as an aphrodisiac and a powerful pain reliever. In Yemen sabers are made from them. As a result one horn can fetch $30K on the black market. The average yearly income in southern Africa is $1,000 and falling. The black rhino is worth more dead than alive. This is a market that does not correct itself.

Another piece of this, that is common to many environmental challenges, is that most black rhinos are communal property, not private property. Imagine if all the black rhinos were in the hands of one rancher - would he let his herd fall from 65K to 2,500? No, he would maximize the value of his scarce resource.

Communal resources problems:

1. The community derives no benefit from having the rhinos around.

2. Millions of people not in southern Africa derive a utility from conserving the black rhino so it is easier to let someone else do the work of conservation. How much time and energy can any one of us put into conserving rare animals?

3. Tour providers who make a lot of money showing wealthy people wild animals have a stake and spend a lot of money on conservation efforts, but that gives some of them a free-rider disadvantage. They are saving a communal resource and other companies that may not invest in conservation will be able to undercut their price - thus getting a free ride from their conservation efforts.

Is there a role for the government here? Unfortunately, this government is low on resources and often very corrupt. The one party that has the most incentive is the poacher who hunts them down, kills them, and takes the horn.

Please answer the following questions:

1. Address the supply and demand issues. How does this situation relate to the laws of supply and demand?

2. Address elasticity. Research what elasticity means. Is the horn elastic or inelastic? Why?

3. Research more on the topic and give the suggestion to solve this problem - approach it from both the demand and supply side. What kind of incentives would help with the problem?