Question

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 an increase in the persons daily wage rate. c. How does changing the person’s tastes and preferences toward health and away from other goods and services affect the answers to a and b above?

Answer 1

Answer :-

The Grossman model deals with the fact that how education can influence the production of health through the demand of health capital.
a- Health is a capital goods. It is purchased fdom the market in the form of inputs like medicines or drugs. Education basically rises the marginal product of health inputs The increase in health care would automatically increase the health status of an individual. . Schooling raises the endogenous input of health and other production functions.
B- An individual would only like to invest when the returning scale is positive that is value of health is positive with the investment made on has effect on future income. Health capital can be generated at least cost for educated people leading to less investments with higher returning scale. Education and health shares a positive relationship as it keep us updating about the side effects of drugs and poaitive effect of health remedies or inputs.
C- The tastes abd preferences ia an important factor that affecta the demand of the commodity. Education has always shown a poaitive up gradation of medical graph for different reasons like one we have discussed above other can be it traines the professional to enter the field However , its individual wish that determines the demand of health care.
The quality of product make it difficult to meet the demand. Howver health care hace individual market like education , institutional etc. They all plays an important role.