To reduce litter and increase recycling rates, a national government introduces a Deposit Return Scheme (DRS). A mandatory deposit of £0.20 £0.20\,£0.20 is added to the retail price of all single-use beverage containers (plastic bottles and aluminium cans), which is fully refunded when the consumer returns the empty container to a certified collection point. Producers must also pay an administrative fee per container to fund the recycling infrastructure.
Which one of the following is the most likely outcome of introducing this scheme?
The demand for beverages packaged in alternative materials, such as cartons, will decrease.
Beverage containers included in the scheme will become non-rival public goods.
Low-income consumers who do not return their empty containers will experience a decrease in their real disposable income.
The total market supply curve of beverages in single-use containers will shift to the right.
378 exam-style questions on AQA A Level Economics 1.8 The market mechanism, market failure and government intervention in markets, covering 1.8.1 How markets and prices allocate resources, 1.8.2 The meaning of market failure, 1.8.3 Public goods, private goods and quasi-public goods, 1.8.4 Positive and negative externalities in consumption and production, 1.8.5 Merit and demerit goods, 1.8.6 Market imperfections, 1.8.7 Competition policy (A-level only), 1.8.8 Public ownership, privatisation, regulation and deregulation of markets (A-level only), 1.8.9 Government intervention in markets, and 1.8.10 Government failure. Each one has a worked solution and a mark scheme showing where the marks go.