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people who earn a higher salary can afford more goods, including health care. However, according to...

people who earn a higher salary can afford more goods, including health care. However, according to grossman

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Solution: People who earn a higher salary can afford more goods, including health care. However, according to Grossman, they will prefer to select a higher desired health stock.

As according to Grossman, the health care demand is determined by marginal efficiency to invest (MEI). MEI holds negative relation between cost of capital and stock of capital. The curve indicates that when capital cost raises the health stock falls. If wages rises, an individual will obtain higher return from healthy days and MEI will increase for all levels of the health stock.

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