Suppose the price of electricity is $7 per 100 kwh (h-kwh) per month. There is no tax for thefirst 10 h-kwh, a 10% tax for 10-20 h-kwh, a 20% tax for…

Suppose the price of electricity is $7 per 100 kwh (h-kwh) per month. There is no tax for thefirst 10 h-kwh, a 10% tax for 10-20 h-kwh, a 20% tax for 20-30 h-kwh, a 30% tax for 30 or moreh-kwh. Note that tax applies only to the units in the relevant range, not earlier units. Assume aconsumer has a fixed budget of $600 per month for utilities, so the axes are electricity and allother utilities, with the price of all other utilities p2=1. Draw the budget constraint for anindividual facing this price structure.





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