Tech Memo 119


benefits -- here defined as gross economic benefits derived from use of a resource.  Not to be confused with net benefits where opportunity costs are subtracted from gross benefits.

bioeconomic modeling -- mathematical formulae that simulate the interaction between biological behavior of fish stocks and human behavior of users of the resource as it is shaped by economic factors.

cash flow analysis -- a type of financial analysis that compares the timing and amount of cash inflows with the timing and amount of cash outflows.  A firm’s cash flow position can greatly affect its ability to remain in business.  These effects may not be apparent from a cost-benefit analysis.

charter boat -- any vessel-for-hire engaged in recreational fishing and hired for a charter fee by an individual or a group of individuals (for the exclusive use of that individual or group of individuals), which results in that vessel being unavailable for hire to any other individual or group of individuals during the period of the charter.

consumer surplus  -- net economic value from consumption or use of a good or service.  It is the difference between the maximum that a person is willing to pay for the good or service rather than do without it, and what he/she actually spends.  The adjective, “consumer” is misleading because this category of value also applies to non-consumptive uses (e.g., observing salmon runs) and to non-use benefits (e.g., protecting marine mammals from exploitation).

contingent valuation -- a method which uses survey questions to elicit people’s preferences for public goods by asking what they would be willing to pay or receive for specified increments or decrements in  the public good.

cost-benefit analysis -- a comparison of the economic value of using a productive resource with the opportunity cost of using the resource.  Projects or regulations are evaluated based on how they change net economic value.

demand function -- a behavioral relationship between quantity consumed and a person’s maximum willingness to pay for incremental increases in quantity.  It is usually an inverse relationship where at higher (lower) prices, less (more) quantity is consumed.  Other factors which influence willingness-to-pay are income, tastes and preferences, and price of substitutes.

economic efficiency -- a measure of the size of consumer surplus and producer surplus.  An increase in the combined surpluses is an increase in economic efficiency.

ecotourists -- individuals who rent services of non-consumptive providers or produce non-consumptive trips themselves.

existence value -- value that individuals place on the existence of living ocean resources.

financial analysis -- cost accounting based on market prices as opposed to opportunity costs.

financial ratio -- a method of evaluating a firm’s financial position.  An example is the “current ratio” which is equal to current assets divided by current liabilities.

fixed costs -- costs that do not vary with the level of output.

input-output analysis -- a systematic method that both describes the financial linkages and network of input supplies and production which connect industries in a regional economy (however defined), and predicts the changes in regional output, income, and employment.  Input-output analysis generally focuses on economic activity and the self-sufficiency of an economy, unlike cost-benefit analysis which focuses on changes in net national benefits from use of a productive resource.

maximum willingness to pay -- maximum valuation placed by an individual on a good or service in terms of money.  The summation of individuals’ maximum willingness to pay is tantamount to the total economic value of consumer benefits (i.e., gross benefits).

net economic value (alternate term for net national benefits) -- sum of consumer surplus and producer surplus.

net national benefits (alternate term for net economic value) -- sum of consumer surplus and producer surplus.

non-consumptive users -- individuals may use (i.e., observe), yet not consume, certain living ocean resources, like whale watching, sightseeing, or scuba diving.  Additionally, individuals might value the mere existence of living ocean resources without actually observing them.  In this document, uses of this kind are defined as non-consumptive.  Some argue that certain non-consumptive uses disrupt habitats, breeding patterns, or feeding patterns and should therefore not be considered non-consumptive.  Our use of the term is for classification purposes only and not for descriptive purposes.

non-users -- individuals who obtain value from a resource, but do not use the resource.

opportunity cost -- generally intended to refer to foregone economic value when a productive resource, such as labor, capital, land, or fish, is used to produce one good or service instead of something else.

party boat (also called a head boat) -- any vessel-for-hire engaged in recreational fishing and hired (or leased, in whole or part) for a per-capita fee on a first-come, first-served basis.

producer surplus -- the total revenue obtained from using a productive resource minus all opportunity costs of production (opportunity costs of entrepreneurs’ skills, labor, capital, and ownership of natural resources).

supply function -- shows the quantities of goods and services a producer would provide at various prices.

trade analysis -- economic analysis of the trade of goods and services between countries.

value added -- the dollar value of a firm’s output (i.e., harvest) minus the dollar  value of the inputs it purchases from other firms.

variable costs -- cost that vary with the level of output.
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(File Modified Nov. 19 2010)