Final answer:
As a person's income rises, consumption of normal goods like wine and cheese typically increases due to the income effect. However, the actual change in consumption depends on individual preferences and market conditions such as supply decreases due to higher input costs or demand increases from positive health studies.
Step-by-step explanation:
When a person's income increases, and wine and cheese are both normal goods, the typical outcome is that she will buy more of both goods. This is due to the income effect, which indicates that as income rises, the consumption of normal goods increases since they are more desirable and consumers can afford more. Moreover, two events can affect the market for cheese: first, if the price of milk (a key input in cheese production) rises, leading to a decreased supply of cheese; second, if a new health study increases the demand for cheese. In the first scenario, the decrease in supply could lead to higher prices, partially offsetting the increased demand from the higher income. In the second scenario, demand would increase due to the perceived health benefits, further enhancing consumption if the individual's budget allows.
Each individual's preferences and the utilities derived from consuming goods will dictate exactly how much more of wine and cheese will be consumed. However, generally, an increase in income for a consumer will result in an increase in the quantity consumed of normal goods. The actual change in consumption will also depend on how the market adjusts to the changes in supply and demand for cheese.