Final answer:
An increase in the cost of aluminum leads to an increase in production costs for soft drink companies, potentially causing a higher equilibrium price. The effect depends on whether the demand for their products is elastic or inelastic. A decrease in input costs would shift AS to the right, potentially reducing prices and increasing the equilibrium quantity.
Step-by-step explanation:
If the cost of aluminum used by soft drink companies increases, we are likely discussing the scenario of increasing cost. When input costs rise, it generally leads to an upward shift in the production cost for the companies that depend on these inputs. According to the reference information provided, in such a case (b), suppliers might not be able to increase supply as much as demand, especially if inputs become scarce or wages are rising. This can lead to a higher equilibrium price, with possible effects on the Consumer Price Index (CPI) and the inflation rate. However, the actual impact on prices and economic equilibrium would depend on the elasticity of demand for the product—as illustrated in Figure 5.9, where inelastic demand allows companies to pass higher costs onto consumers, leading to higher prices without much decline in equilibrium quantity. On the other hand, if the demand is elastic, the shift in supply could result in a substantially lower equilibrium quantity, forcing consumers to adjust their consumption.
If input prices fall and the Aggregate Supply (AS) shifts to the right by 150 units, the new equilibrium will be determined by the intersection of this new AS curve with the current Aggregate Demand (AD) curve. A shift to the right in the AS curve typically leads to a lower equilibrium price and a higher equilibrium quantity, assuming other factors remain constant.