A consumer’s utility function is given by U = 2x1x2 + 3x₁ where x₁ and x₁ denote the number of items of two goods G1 and G2. The prices of the goods are $1 and $2 respectively. Use Lagrange multipliers to find the maximum value of U if the consumer's income is $83. Estimate the new optimal utility in income rises by $1.

A consumer’s utility function is given by U = 2x1x2 + 3x₁ where x₁ and x₁ denote the number of items of two goods G1 and G2. The prices of the goods are $1 and $2 respectively. Use Lagrange multipliers to find the maximum value of U if the consumer's income is $83. Estimate the new optimal utility in income rises by $1.

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Chapter1: Making Economics Decisions

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Product and Price Bundling

Product and price bundling is used as a marketing strategy by businesses, where complementary products and services are combined and sold as a package deal. This bundled price is usually less than the total price of the individual products if they were to be sold separately. When bundled and sold, each product is sold at a reduced price. Using a price bundling strategy helps increase the average revenue per user and also increases the engagement with the user. This happens as the perceived value of the bundled products is more than the individual products.

Question

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A consumer's utility function is given by
U = 2x1x₂ + 3x₁
where x₁ and x₁ denote the number of items of two goods G1 and G2. The prices of
the goods are $1 and $2 respectively. Use Lagrange multipliers to find the maximum
value of U if the consumer's income is $83. Estimate the new optimal utility in income
rises by $1.

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