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Plastic grocery bags are nowadays a growing problem in the world, bags now areeverywhere including the oceans where wildlife strange, choke and make theanimals to die due to its consumption.  They are cheap to produce and its durabilityis long.  Let's suppose that an environmentally friendly company comes up with asubstitute bag which is even cheaper to produce (therefore can sell it at a cheaperprice), it is biodegradable and can be composted within days for its use in gardensand agriculture.Given this information, answer the following questions:a) Explain what would be the changes in the demand (curve) for this plastic bagsubstitute, assuming changes in the supply curve will remain constant. (Hint: is it amovement along the demand line, a shift? please explain the mechanism)B)   Given the situation in A) explain the new market conditions for this new bag in termsof price and quantity demanded.2.  It is well known that Environmental problems are modeled as market failures usingPublic goods and externality theories.  What are the conditions needed to use thePublic good theory, and what are the conditions to use the externality theory?Please differentiate them.


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