Question

Jane is a utility-maximizing consumer who is spending her entire budget on the optimal quantity of wallets and eyeglasses. The price of wallets falls. Jane will _____ her consumption of wallets if wallets are a(n) _____ good and the income effect _____ the substitution effect.
a. increase; inferior;
b. is stronger than decrease; inferior;
c. is weaker than decrease; normal;
d. reinforces; increase;
e. normal; reinforces

Answer 1

Answer:

There is a missing part of the answer in all the options as there are three spaces to fill and only two part of the answers are provided in all the options.

Hence the correct answer would be ---

increase; normal; reinforces      

which may be considered as answer option e). normal; reinforces where 'increase' is missing.

Explanation:

              The utility-maximizing model is a model theory of a consumer which shows how consumers try to allocate their income money. It is believe that every customer is a rational being and try to get the optimized value for their money spent. Consumers' resources are limited so that their incomes are also limited. Consumers have budget constraint.

           According to the Utility Maximization theory, every consumers try to decide to spend their incomes so that the last pie spent on a product  yields an amount which is equal to the extra marginal utility.

           Thus a utility-maximizing consumer, Jane who is spending his income on wallets and eyeglasses will increase the purchased of wallets, when the price of the wall decreases, if the wallets are considered a normal good and the income effect of Jane will reinforces  the substitution effect.

Therefore the answer is ---

increase; normal; reinforces