Unformatted text preview: happy it makes her. Please use the Lagrangian Optimisation technique to calculate the bundle of bling and things that will make 'Ella happiest, and the level of utility this bundle confers. c) Benjie the Beau, upon discovering that 'Ella's bundle of bling and things is indeed rational, really would prefer her to consume more things. ..so he decides to introduce a kink in her budget. Assuming that Benjie can influence both 'Ella's allowance and prices use budget constraints to illustrate: The effect of providing a R10000 voucher to be spent exclusively on things. .. a. The effect of raising the price of bling beyond a quantity threshold of bling of 200 b. The effect of reducing the price of things below a quantity threshold of bling of 200 c. d) Of a., b. and c. above which do you consider the most effective way for Benjie to encourage 'Ella's consumption of things instead of bling? e) Tutorial 2 Page 1...
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This note was uploaded on 05/23/2011 for the course ECON 203 taught by Professor Jules during the Spring '11 term at University of Cape Town.
- Spring '11