Used Newspaper Often Is Recycled into Building Insulation,packaging Materials,and Other

Essay

Used newspaper often is recycled into building insulation,packaging materials,and other products.At present,there is a "glut" of used newspaper today in the United States.As a result,recycling centers are refusing to pay for used newspaper anymore,even though the price of used newspaper used to be about $.02 per pound.(Recycling centers continue to take used newspaper,without payment,from environmentally conscious consumers.)The "glut" is also causing consumers to throw out large quantities of used newspaper in their trash,where it ends up in landfills.Since these landfills are becoming costly to build and maintain,local governments are seeking ways to encourage recycling and reduce the amount of used newspaper that ends up in landfills.Your task is to analyze this problem in the context of the following numerical example.
Suppose the market for used newspaper can be described by the following equations:
Q_D = 600 - 10P
Q_S = 900
where Q_D is the quantity of used newspaper demanded by recycling centers.All prices are measured in cents per hundred pounds and all quantities are measured in pounds.
(a)Compute the initial equilibrium price (P₁)and quantity (Q₁)of used newspaper.Then identify how much used newspaper gets recycled and how much ends up in landfills.Is there a "glut" of used newspaper? Explain your answers briefly.
(b)Suppose the U.S.government required all newspaper publishers to purchase 25 percent of their newsprint from recycled newspaper.Suppose also that this requirement would shift the demand curve for used newspaper to either Q_D = 400 - 10P or Q_D = 1200 - 10P.Which demand curve would result from the 25 per cent recycling requirement?
(c)Based on your answer in (b),compute the new equilibrium price (P₂)and quantity (Q₂)of used newspaper.Now how much used newspaper gets recycled and how much ends up in landfills?
(d)Would the 25 per cent requirement help eliminate the alleged "glut" of used newspaper in the United States? Explain briefly with reference to your answers in (c).
(e)Draw an appropriate graph of your solutions in (a)and (c).