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The income effect refers to the change in consumers' demand for a good due to a change in real income. The change in the price of goods or services or changes in wages may alter the purchasing power of the consumer.

The income effect results in greater demand for normal goods and lower demand for inferior goods due to an increase in real income.

As there is an increase in the rise in the price of one good, the real income of the consumer will decrease, and it will result in a decrease in purchasing power of the consumer.

When the price of peanut butter rises, the budget constraint gets disturbed; it moves inside and decreases the options of greater consumption. Maggie will feel lower purchasing power, which would discourage her consumption of both the normal goods, peanut butter, and jelly. Thus, there will be a reduction in the consumption of both goods.