Final answer:
In the supply and demand model, if the cost of automobile parts decreases, manufacturers are incentivized to supply a higher quantity of automobiles due to an increase in potential profits. This results in an increase in supply, represented by a shift in the supply curve to the right.
Step-by-step explanation:
In the supply and demand model, if the cost of automobile parts decreases, the outcome is likely an increase in supply. This is because a reduction in the cost of production, such as a decrease in part prices, allows car manufacturers to earn higher profits at any given selling price. Hence, they are incentivized to supply a higher quantity of automobiles. This is visually represented in the graph as a shift of the supply curve to the right, from So to S₂, showing that at every price point, the quantity supplied has increased.
For instance, at a selling price of $20,000, the quantity supplied might surge from 18 million units on the original supply curve (So) to 19.8 million on the new supply curve S2, which corresponds to an increase in supply.
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