Analysis of tornado effect on the productivity of land and labor.
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Answer:
Explanation:The impact of a tornado results in both direct and indirect losses to the local economy. Direct losses result from the destruction of assets from the initial impact of the tornado and include the loss of human lives, roads, power and phone lines, crops, factories, homes, and natural resources. Estimates indicate that the Joplin tornado destroyed around 2,000 buildings and caused damage to at least a quarter of the city. To calculate the cost of direct losses one must either sum up the total value of the decrease in the value of assets or sum up the total of the lost income that lost assets generated.
While costs are harder to estimate than direct losses, indirect losses that occur from the destruction of physical assets can be quite significant. These losses include lost production and sales, incomes and labor time, increased commute times and transportation costs from goods having to be rerouted, decreased tourist activity, and utility disruptions. The decreased economic activity also results in lost taxable receipts and uses up federal disaster relief funds in order to help clean-up, repair, and replace lost assets.
Lost production can also result in surging prices due to consequent shortages, as when refineries were affected by the swath of tornado activity that swept through the southern United States in 2011 causing gas prices to rise. Further, although insurance companies don’t usually increase rates because of a single disaster, the increasing tornado activity in recent years may lead to permanently higher insurance premiums or reduced coverage.