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Econ 101: An increase in input costs will cause a decrease (shift to the left) in supply. Price will rise. By how much depends on the price elasticity of demand. If demand is highly inelastic, the majority of the increase in input costs will be passed through to customers. Want real world evidence?
From the Environment News Service:
One of the nation's largest electric utilities has agreed to spend $4.6 billion to reduce harmful air emissions from 16 coal-fired power plants, ending an eight year legal battle over alleged violations of the Clean Air Act.
Federal officials called the agreement with American Electric Power, AEP, the largest environmental settlement in U.S. history and said it would dramatically improve air quality in the eastern United States.
But who's going to pay?
From the Columbus Dispatch:
AEP said it already has spent much of the money included in the settlement and has budgeted for the rest.
[...]
Since January 2006, Ohio customers have paid an extra $2 to $3 per month, part of which pays for the upgrades.
[...]
Ohio customers are footing the bill as part of yearly increases approved by the Public Utilities Commission, the company said. Customers in other states are seeing increases in their bills as well.
Yep, economics is easy.
