Final answer:
With a vertical demand curve for movies, Alice's substitution effect is nonexistent, and her income effect is unspecified because such a demand curve indicates she is unresponsive to price changes. Typically, these effects would mean purchasing more movies and other goods due to the price decrease, but in this case, Alice's consumption of movies does not change, diverging from usual consumption patterns.
Step-by-step explanation:
To decompose the effect of a decrease in the price of movies with a vertical demand curve for Alice, we can look at both the substitution effect and the income effect. Typically, a decrease in price leads to two effects on the consumer's choice.
First, the substitution effect will make movies more attractive relative to other goods because they are now cheaper; thus, Alice is expected to consume more movies instead of other goods.
However, since Alice's demand curve for movies is vertical, it shows that she is completely unresponsive to changes in price. This would mean that the substitution effect is nonexistent or zero in Alice's case.
The income effect occurs because, with the lower price, Alice can afford the same amount of movies while spending less money, effectively increasing her real income.
With this extra income, she could buy more of all normal goods. Since her demand for movies is perfectly inelastic, she will not buy more movies, rather she could use the leftover money to buy more of other goods.
In standard diagrams, however, a vertical demand curve would not depict a clear income effect because the quantity demanded does not change with price.
In essence, the direction of the movement for both effects would typically be towards purchasing more movies (substitution effect) and purchasing more of other goods or movies (income effect).
Nevertheless, due to the premise of a vertical demand curve, the outcomes diverge from the typical scenario where the quantity does change in response to price shifts.
This might represent Alice's loyalty to movie consumption regardless of its price, leading to nil substitution effect and an unspecified direction for the income effect as it is dependent on what Alice views as her next best alternative with the extra income.