9708/23

Economics 9708/23May/June 2020

Cambridge AS Level · AS Level Data Response and Essays · worked solutions for every part, with the mark scheme

4
questions
40
marks
90
minutes

Topics Classification of Goods and Services · Methods of Government Intervention in Markets · Price Elasticity of Supply · Elasticities of Demand · Price Stability · Monetary Policy · +2 more

Q1Classification of Goods and ServicesMethods of Government Intervention in MarketsFree sample

The growing problem of plastic waste

It has been estimated that, globally, consumers buy a staggering one million plastic bottles every minute and that 91% of these are not recycled. There is now real and growing concern about the serious threat to marine life caused by the dumping of plastic waste in the sea.

There are an estimated 150 million tonnes of plastic waste in the world’s oceans. Every year, millions of birds, mammals and fish die from eating or getting tangled in plastic waste. There is also growing evidence that humans could become ill when consuming fish that has eaten plastic waste. A recent study found that people who often consume seafood eat up to 11 000 tiny pieces of plastic each year. Those living in parts of South East Asia and around the Mediterranean sea are most at risk.

The scale of these problems is worst in Asia’s developing economies. For example, a recent report from Pakistan stated that ‘Continued dumping of plastic products has become a serious threat to animals and plants inhabiting coastal and offshore waters. People do not seem to understand how damaging plastic waste is for the oceans.’ This is a typical concern; significantly, no solutions to these problems have been proposed by Pakistan’s government.

One possible way to tackle the problem is to introduce a ‘bottle tax’ on drinks that are sold in plastic bottles. The amount of tax would ideally depend on the size of the bottle, for example being $0.10 for a one litre bottle and $0.20 for a two litre bottle.

The UK government is considering imposing a ‘deposit return’ scheme similar to those that are successfully operating in Denmark, Germany and Sweden. Customers would pay a deposit when buying drinks in plastic bottles and are refunded the deposit if they return the empty plastic bottles to a retailer.

In most developed countries the legal disposal of plastic waste is heavily regulated. The most common method of disposal is for plastic waste to be buried in landfill sites. Interestingly, in China and India, landfill sites often have very few plastic bottles because people collect bottles and sell them to gain a source of income.

Another solution to the problem of plastic waste is to create a new product by recycling the plastic; more research needs to be carried out to evaluate this option, but this research is expensive and beyond the reach of many developing economies.

The demand for plastic products is forecast to increase due to its widespread use in agriculture, manufacturing and retailing. Unless something is done about the problems of disposal, even more plastic rubbish will find its way into our oceans. The key issue for many of Asia’s developing economies is that their options appear to be limited.

Sources: Dawn, 24 June 2017 and Punjab Daily Times, 1 November 2017

(a)

Explain why a plastic bottle can be classified as both a private good and a demerit good.

4M
(b)
(i)

Distinguish between an ad valorem tax and a specific tax.

2M
(ii)

Explain whether the ‘bottle tax’ referred to in the extract is an ad valorem tax or a specific tax.

2M
(c)
(i)

With the help of a diagram, analyse the impact of the ‘bottle tax’ on the price and sales of plastic bottles.

2M
(ii)

With the help of a diagram(s), explain what would determine the incidence of the ‘bottle tax’ on the consumers of plastic bottles.

4M
(d)

Discuss whether taxing plastic bottles is the most effective way of reducing plastic waste in developing economies.

6M

The rest of this paper

3 more questions
  • Q2Price Elasticity of Supply · Elasticities of Demand20M
  • Q3Price Stability · Monetary Policy20M
  • Q4International Trade and Comparative Advantage · Protectionism20M
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