Final answer:
If income increases and cars are a normal good, demand will increase, and if the prices of steel and aluminum decrease, supply will increase too. Both effects result in a higher quantity of cars supplied in the market, but the final equilibrium price will depend on the relative shifts in demand and supply.
Step-by-step explanation:
When everyone's income increases and cars are a normal good, the demand for cars is likely to grow. This increase in demand shifts the demand curve to the right, indicating a higher quantity of cars demanded at each price level. In response to an income increase, consumers will tend to buy more cars because they have more disposable income.
Conversely, if the prices of inputs like steel and aluminum decrease, producing a car becomes less expensive, which can lead to higher profit margins for producers. Manufacturers are more willing to supply cars at any given price, resulting in a rightward shift of the supply curve from S0 to S2. This increases the quantity supplied of cars at the same price. For example, at a price of $20,000, the quantity supplied might increase from 18 million cars to 19.8 million cars.
The market for cars experiences both an increase in demand and an increase in supply. The overall effect on the equilibrium price and quantity will depend on the relative magnitudes of these two shifts. However, it's generally expected that the quantity of cars in the market will increase.