Say you have a million dollars that you can invest into a bank account for 10% interest each year. how much money will you have each year to live off of?
If you use more than amount,what happens to your original capital? What happens to your sustainability? Relate this to our use of natural capital(the earth).
1. I assume you can use the 10% interest you get. $1000000*.10 = $100,000
2. Then you gain a smaller amount of interest, which results in a lower amount of money you have to live off of in future years.
To calculate how much money you will have each year to live off, you can use the concept of compound interest. Compound interest is calculated by adding the interest earned from previous periods back into the initial amount.
Here's how you can calculate the amount of money you will have each year:
1. Firstly, calculate the interest earned each year: 10% of 1 million dollars is $100,000.
2. Add the interest earned to your initial amount: $1,000,000 + $100,000 = $1,100,000. This will be your total amount at the end of the first year.
3. Repeat this process for subsequent years: for the second year, the interest earned is 10% of $1,100,000, which is $110,000. Add this to the previous year's total: $1,100,000 + $110,000 = $1,210,000.
4. Continue the calculation for subsequent years to find the total amount for each year.
Regarding your original capital, if you use more than the interest earned each year, your capital will start to decrease. For example, if you spend $50,000 each year, your remaining balance will be $1,100,000 - $50,000 = $1,050,000 at the end of the first year.
Relating this to natural capital (the Earth), it works in a similar way. Natural capital represents the Earth's resources, such as forests, water, minerals, and biodiversity. If we consume natural resources without allowing them to regenerate or replenish, we are depleting our natural capital. This can have negative consequences on the sustainability of our planet, just as spending more than the interest earned would eventually deplete your financial capital. To ensure the sustainable use of our natural capital, it is important to consider maintaining a balance between consumption and regeneration.