Question

Assume that the cost of aluminum used by soft-drink companies increases. Which of the following correctly describes the resulting effects in the market for soft drinks distributed in aluminum cans? (More than one statement may be correct.)

a. The demand for soft drinks decreases.

b. The quantity of soft drinks demanded decreases.

c. The supply of soft drinks decreases.

d.The quantity of soft drinks supplied decreases.

Short answer

d.

Step-by-step solution

Step1. Introduction

Equilibrium is determined by the intersection of supply and demand.

Excess supply is when price is higher than the market clearing price.

Excess demand is when price is lower than the market clearing price.

Step2. Explanation

Since aluminum is an input, and an increase in input cost will increase the cost of production. The supply will hence reduce.

Therefore, d. the quantity of soft drinks supplied decreases.