How Does Environmental Economics Function?

In economics we study how and why “people” whether they are consumers, firms, non-profit organisations or government agencies make decisions about the use of valuable limited resources. When studying the environment from an economics perspective we are in fact primarily focusing on how and why “people” make decisions that have environmental consequences. Secondly, we focus on how we can manage institutions to bring these environmental impacts more into balance with changing human demands and the demands of the ecosystem itself. If we follow this economic approach several answers emerge to the basic question asked in environmental economics, that is “Why do people behave in ways that cause environmental degradation?”