Answer to Question #120837 in Microeconomics for Leslie

Question

How a fall in the price of crude oil might impact the price of recycled plastics. Use demand and supply diagrams to illustrate and explain your answers.

Answer 1

Usually, plastics are derived from byproducts of petroleum refining and natural gas processing. When oil prices reduces, the price of plastic resin also reduces. Therefore when the price of crude oil decreases the demand for recycled plastics.

This graph show that when the price of crude oil decreases from p2 to p1 the quantity demanded for recycled plastic decreases from Q2 to Q1 since most people will opt to buy new plastics.