Question

- Using Grossman’s pure investment model of the demand for health, consider the impact of the following on the marginal efficiency of investment (MEI) and related optimal health stock (include a graph in your explanation):

- Rather than having stopped school with a high school diploma, by age 22 Poppy obtained an undergraduate degree in public health. How would this education decision impact her optimal level of health?
- Suppose that after age 22 her wage rate stayed the same, what happens to her optimal stock of health capital by age 30?

Answer #1

Using Grossman’s pure consumption model of the demand for
health, consider the impact of the following on the optimal stock
of health, the optimal amount of health inputs to purchase, and the
optimal spending on all other goods and services other than on
health inputs:
a. An increase in education that only increases productive
efficiency (i.e. education only increases the marginal product of
health
inputs)
b. Suppose that the increase in education in part a. was
simultaneously associated...

3. Using Grossman’s pure consumption model of the demand for
health, consider the impact of the following on the optimal stock
of health, the optimal amount of health inputs to purchase, and the
optimal spending on all other goods and services other than on
health inputs:
a. An increase in education that only increases productive
efficiency (i.e. education only increases the marginal product of
health inputs)
b. Suppose that the increase in education in part a. was
simultaneously associated with...

3. Using Grossman’s pure consumption model of the demand for
health, consider the impact of the following on the optimal stock
of health, the optimal amount of health inputs to purchase, and the
optimal spending on all other goods and services other than on
health inputs:
?a. An increase in education that only increases productive
efficiency (i.e. education ?only increases the marginal product of
health inputs)?
?b. Suppose that the increase in education in part a was
simultaneously associated with...

In Grossman’s model of health investment, demand for medical
care:
⦁ Increases with education
⦁ Decreases with age as health becomes more costly
⦁ Decreases if technology increases
⦁ Increases with demand for health

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