In Order to Encourage Energy Conservation,many Public Utility Companies Charge

Essay

In order to encourage energy conservation,many public utility companies charge consumers a higher rate on units of electricity consumed in excess of some threshold amount.In contrast,a common marketing ploy by other firms is to offer "quantity discounts" to consumers who purchase large quantities of a good.To illustrate how these pricing schemes alter the typical consumer's opportunity set,suppose income = $100,P_x = $2 if the consumer buys less than 40 units of X,P_x = $3 if the consumer buys more than 40 units of X,and P_y = $5.Draw the budget constraint.How would the budget constraint change if the price decreased to $1 after 40 units of X were consumed?