The Law of Demand in city of Gujarat

Among many environmental problems facing in India is how to dispose of the vast amounts of
garbage generated each day by households and businesses. As the volume of garbage grows,
existing disposal sites are filling up and it is becoming increasingly difficult to find new locations
near urban areas for landfills.
One small community in Gujarat used Law of Demand to ease its garbage collection problem.
Residents of this small city were paying an annual fixed fee of Rs 120 per resident for garbage
collection and discarding a daily average of 2.2 Kgs. per person. Because the collection fees
was fixed, the additional expense to residents for trash disposal was zero, and they had no
financial incentive to conserve on the amount of trash they produced.
The city Municipality began charging by the bag for garbage collection. The city required that all
trash be placed in special bags sold by the municipality. For example, a large bag had a
capacity of about 40 kgs and sold for Rs 10. Thus, the marginal cost to residents of generating
additional trasg increased from zero to about 25 paise per Kgs. Garbage that was not in an
approved bag was not picked up. In addition, the Municipality introduced a recycling
programme. Each household was given buckets to be filled with cans and bottles that were
picked up every week. The city aso arranged for newspaper to be collected once a month.
The result was predictable- people began to dump less trash. During the first year the program
was in effect, Trash collections per person declined to less than one Kg per day. The citizens
benefited because they paid about 50 percent less than before, and the Municipality also
reduced its garbage collection costs.

Questions
1. Explain by reading this case as why the Law of Demand was not applicable when garbage
collection fees was fixed per annum?
2. How the Law of demand was used to ease the garbage collection problem?