Read the following descriptions of economies. For each one, define and draw
the budget set. State if the budget set is compact or not.
a) There are two goods: leisure (l), and a composite good (m): The price for
the composite good is always 1. Agents are endowed with a fixed income y > 0,
but also with an endowment in time of 1 unit. They can spend their time on
leisure, but they can also decide to work. An agent receives a wage p per unit
of time worked.
b) An agent can buy two diferent goods, has an endowment of money y = 1;
and faces prices p1 = p2 = 1 .He was also issued a coupon that allows him to
obtain 1 unit of good 1 for free. This coupon cannot be exchanged for money,
traded to anyone else or kept for later.
c) There are two goods (1 and 2), for which prices are p1 and p2: The
government requires that everyone have at least one unit of good 2. Agents are
endowed with a fixed income y >= p2: