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, px = $2 if the consumer buys less than 40 units of x, px = $3 if the consumer buys more than 40 units of x, and py = $5. draw the budget constraint. how would the budget constraint change if the price decreased to $1 after 40 units of x were consumed?

ATTACHED ANSWER

Explanation:

The budget constrain will show all the possible consumption considering the price of both product X and product Y

We have to calculate at X = 0 X = 40 and Y = 0

if X = 0 this means we don't buy any product X so is all used to purchase Y 100/5 = 20 units

at 40 units of X we got 40 x 2 = 80 dollars leaving 20 for Y therefore 20/5 = 4

At X = 40 and Y = 4 we find the other budget constrain

Last if Y = 0

if the mass consumption of X is penalized we consume 20/3 = 6.67 more units leading to 46.67

while if it is encourage we consume 20/1 = 20 more units

leading to 60 units in total

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