Manufacturers of cardboard cartons and other packaging use a combination of wood pulp and wastepap
Question: 4 Manufacturers of cardboard cartons and other packaging use a combination of wood pulp and wastepaper in production. The supply of wastepaper comes form the households and businesses. An issue in the environmental policy is the effectiveness of price incentives in encouraging recycling of wastepaper. The price elasticity of the demand for wastepaper has been estimated to be -0.07, while the price elasticity of the supply has been estimated to be 0.
(A) Consider a government policy that reduces the price of wastepaper to manufacturers by 5%. How will this affect the quantity demanded?
(B) Consider a government policy that increases the price of wastepaper to sellers by 5%. How will this affect the quantity supplied?
(C) Are price incentives an effective way of increasing the recycling of wastepaper?
Type of Deliverable: Word Document
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