Wgu Gke2 Task 2

Task 1 The rice market is our product concerned in this assignment. As a pantry necessity for the Asians, the rice market has an inelastic demand. Also, it has no close substitutes or perfect substitutes. This makes the importance of rice inevitable. On the other hand, the rice market has an elastic supply. Due to the wide variety of rice provided in the market, the quantity supplied by sellers tends to respond substantially to slight changes in price. Assume an equal value of tax is placed on the consumption and production of rice market. In order to clearly present the surpluses and government revenue, a welfare analysis is shown below. As shown in the analysis, the negative difference of –B-C in consumer surplus and –D-E in producer
surplus indicates that both consumers and producers are worse off. The –C-E in total surplus represents the deadweight loss, causing buyers consuming less and sellers producing less. The burden of tax is shared between buyers and sellers of rice market (Mankiw, 2007). In the diagram, it shows the distance between POand PB is greater than POandPS, signifying the price of buyers pay is more than the price sellers receive. Plus, the burden of tax tends to fall on the side of the market which is less elastic, in this case, the consumer. This again concretes the fact that buyers have a greater burden in bearing the taxation than sellers of rice market. There is no government revenue in a free market. After a tax is imposed, +B+D displays the increase of government revenue collected from buyers and sellers of rice market. The change in total welfare comprises changes in consumer surplus(negative), producer surplus(negative), government revenue(positive) and total surplus(negative) demonstrates that the reduction of both surpluses exceeds the government revenue of +B+D, showing the government is the only party who is better off. The overall social welfare is reduced as a result of taxation distorts incentives.
(320 words) | Before tax | After tax | Changes | Consumer Surplus | A+B+C | A | -B -C | Producer Surplus | D+E+F | F | -D –E | Government Revenue | None | B+D | +B +D | Total surplus | A+B+C+D+E+F | A+B+D+F | -C -E |

Task 2 Factory which specialise in paper production causes pollution which causes negative impact to the society.
It is seen as a negative externality due to the use of toxic chemicals during the production of paper that are suspected of causing developmental, reproductive, and immune system damage. This reflects the society cost of producing paper is larger than cost of paper producers. As shown in the diagram, the social cost curve measures the private cost of producers and cost of bystander affected as a result of negative externality that the paper producers produced. The social cost curve shows a shift to the left of private cost curve, due to the excessive amount of paper produced, and the external cost on bystander is taken in to consideration. The difference between these two curves represent the externality(pollution) caused by the paper producer. At the quantity less than or equals to QO, consumers value paper more than the social cost of producing it. This negative production externality is considered harmful to society. If paper producer produce more thanQO, the social cost of producing paper exceeds the value of paper to consumers. Therefore the intersection point of demand curve and social cost curve indicates the social optimal quantity in the viewpoint of society. Hence reducing the plastic production below the market equilibrium, QM to the socially optimal quantity, QOincreases the total economic well-being of
society. As mentioned above, paper or pulp factories are identified as a negative production externality to the society. The pulp and paper industry is said to be one of the largest and leading polluting industries in the world, as it releases over a hundred million kg of toxic pollutants each year(National Pollutant Release Inventory, 1996, as cited in Reach for Unbleached Foundation, 1999). The production of paper or pulp is very energy intensive. Huge amount of water is required and often the use toxic chemicals during production are inevitable. The pulp and paper industries comprises manufacturing enterprises that convert cellulose fibre into a wide variety of pulps, papers and paperboards such as newsprint, packaging paper, tissue, uncoated printing and writing papers, coated printing and writing papers, packaging paper boards and specialty papers. In general, the pollution caused during production of paper can be emphasis in certain essential materials used during the production of pulp or paper.

First, the large consumption of fresh water used by pulp mills have been the major concern of society. Wastewater as a result of chemical and mechanical pulping contains 12-20kg of Biochemical Oxygen Demand (BOD)/t of air-dried pulp (ADP) with values up to 350kg/t , and 15-25kg of BOD/t of ADP respectively (World Bank Group, 1998). As for chemimechanical pulping, BOD discharges 3 to 10 times higher than of mechanical pulping (World et al., 1998). To enlighten readers, BOD signifies the organic pollution in the aquatic system, indicating organic pollutant load in surface system (Suthar and Surindra, 2010).The consumption by pulp mills have harmed habitat near mills, water levels necessary for fish is reduced, water temperature is altered and it contributes an environmental factor for fish(Reach et al., 1999). These effects are irreversible and it causes negative impact to the society. Hence, specific authorities should assist mill owners to reduce the pollution level and the public should be aware of the external cost of producing paper.

Next, our focus is the use of chlorine and chlorine compounds in bleaching of woodpulp, the raw material of paper (Parnanen and Heikki, 1993). Especially during the chemical pulps produced during the kraft process or sulphite process, the use of chlorine as bleaching agent is unavoidable. When chlorine is used in the process, dioxins and organochlorines are formed (The Women’s Environmental Network,1994). Environmental Protection Agency (EPA,2008) of US has stated that dioxins are cancer causing substance to humans. People who are exposed to dioxins have experienced significant changes in hormonal levels (EPA, 2008). Thus, Totally Chlorine-Free (TCF) pulp should be encouraged in order to eliminate the toxicity of air pollution and toxic waste produced (Reach et al., 1999). The discussion above has shown few harmful substances during the production of pulp or paper factories.
Statistical evidence is presented for further understanding of how the pollutants are harmful to the society. In conclusion, the general societies will still have to bear the social cost as a result of pollutants emission due to the need of consumers.
(724 words)

Reference List:
Mankiw, N.G. (2007). Principle of Microeconomics (4th ed.). USA: Thomson Higher Education.
Parnanen, Heikki. (1993, January). Global challenges for the forest industries. Unitas, 65(1), 19. Retrieved from EBSCOHost.
Reach for Unbleached Foundation. (1999). The Pulp Pollution Primer. Vancouver, Canada: Broten and Ritchlin.
Suthar, Surindra (2010). "Water quality assessment of river Hindon at Ghaziabad, India: impact of industrial and urban wastewater". Environmental monitoring and assessment (0167-6369), 165 (1-4), p. 103. Retrived from EBSCOHost .

The Women’s Environmental Network Trust . (1994) Chlorine, pollution and the environment. London: Link, Canning and Rees.
U.S. Environmental Protection Agency. Priority PBTs : Dioxins and Furans Fact Sheet. Washington, D.C.: Office of Pollution Prevention and Toxics.

World Bank Group. (1998). Pollution Prevention and Abatement Handbook: Pulp and Paper Mills. Washington D.C.: Environment
Department.