Environment includes all the living components and non-living components that are essential for human activities (resources). Economy is the wealth of a country and it includes industries, households, government, technology, markets etc. Economics is the study of how and why individuals, groups and organizations make decisions about the use and distribution of valuable human and non-human resources. Environmental Economics basically focuses on choices and how we use our resources. As environmental resources are scarce and as the environment has limited capacity to absorb waste and transform it into harmless substances, environmental economics looks at natural resources, their extraction, use and how the waste products are returned to the environment.Environmental Economics also focuses on how incentives can help or hurt the environment. It is also used to create policies and environmental solutions.