For this example you might want to read section 5.5 from the book. Veras utility over consumption C (a composition good), and leisure L (work-free time) is given by u(C, L) = C L. Her hourly wage is given by w = 5. Suppose she can work 24 hours a day if she wants to and the price of the composite good is given by Pc = 1.

(a) Depict her budget constraint and indifference curves on a graph.

(b) Suppose her wage increases to w = 10. Find her (Hicksian) substitution and income effects.