Question

1. Suppose individual A received a much better education than individual B, and consequently earns twice as much per hour of labor.
   1. If both individuals work 40 hours a week, who will have greater H^∗? Why?
   2. If both individuals work enough hours to earn exactly $50,000 per year, who will have greater H^*? Why?
   3. Explain briefly why your answer to part (a) may change if you found out that individual A had to spend ten times as many hours on homework during her schooling years as individual B did.
   4. Explain why it is optimal for individual B to invest less in health when she is already less healthy than A. Why does she not invest more to “catch up”?

Answer 1

Part A

Here, A will have higher optimal growth than B, H*. It is because of the marginal health capital will be shifted to the B’s curve. Because A will spend more money on health than B, and also A’s health production function is higher than B’s because A has more educated.

Part B

In this case, As health is far better than B’s health because A is more educated and work a few hours than B., so A has more time to spend health investment than B.

Part C

Here the budget line of A has less likely to shift to the right of B. it is because A didn’t get time to spend exercises in the past. So A had little free time. So, her health is worse than B.

Part D

It is not possible to catch up with the health of B because her return on health investment is lower than B even though A is better health than B.