Assume that garbage collection is now free. Suppose a local goverment began to charge a household $2 every time that a household put out a can of trash for weekly garbage collection. Using the concept of opportunity cost explain how this might alter behavior.
To understand the concept of opportunity cost in this context, we need to consider the trade-offs and alternatives that households may face when it comes to garbage collection.
Initially, when garbage collection is free, households can dispose of the trash without any direct monetary cost. However, when the local government starts charging $2 for every can of trash collected weekly, households now face an opportunity cost.
Opportunity cost refers to the value of the next best alternative foregone when making a decision. In this case, the opportunity cost can be seen as the cost of disposing of the trash in alternative ways or the cost of not engaging in certain behaviors.
Here are a few ways in which the introduction of the $2 fee may alter household behavior:
1. Reducing Waste Generation: Households may become more conscious of the amount of garbage they produce and look for ways to reduce waste generation. This could involve recycling more, composting, or buying products with less packaging.
2. Waste Separation and Sorting: To minimize the number of cans of trash and reduce costs, households may start separating and sorting their waste more effectively. This might involve segregating recyclables, organic waste, and non-recyclables into different bins, thereby reducing the number of cans needed.
3. Shared Costs or Alternative Solutions: Households may explore cost-sharing options with neighbors or consider alternative waste management solutions. For instance, some communities may opt for shared dumpsters or hire private waste management services that offer lower rates.
4. Illegal Dumping or Unauthorized Disposal: In some cases, the $2 fee may lead to undesirable behavior, such as illegal dumping or disposing of trash in unauthorized locations, to avoid paying the fee. This can have negative environmental and health consequences and may require additional enforcement or education efforts.
Overall, the introduction of the $2 fee provides households with a new incentive structure, forcing them to weigh the cost of garbage collection against alternative actions. By considering the opportunity cost, households may alter their behavior to minimize costs, be more environmentally conscious, or explore alternative waste management options.