Kapitel 2: Feasible Set

Question 1

Budget set, budget line and opportunity costs

Answer 1

Question 2

Properties of the budget set

Answer 2

I Bounded: it is possible to enclose the budget set in a sphere of sufficiently large finite size, provided M is finite and all prices are strictly positive.
I Closed: the boundary of the budget set is feasible.
I Convex: any convex combination of two bundles in the budget set is also feasible (intermediate bundle cannot cost more than the most expensive of the bundles).
I Non-empty: if at least one price is finite, M > 0 allows the consumer to buy a positive amount of some good.

Question 3

Effects of changes in income or prices

Answer 3