 Item (2) introduces the concept of incomplete markets, formulated in terms of net trade, the budget set is contained in a half space intersecting the positive cone of contingent goods at zero net trade only (this is called absence of arbitrage).This is because without transaction cost agents will demand an infinite amount of any trade promising positive consumption in some state and no negative net trade against that in any other good and state.This half space, containing the budget set and separating it from the free lunch cone, corresponds to a half line of positive prices.