Question

Consider the relationship between health and income per capita.

a) Draw a well labelled graph showing the relationships explained between the two variables. Identify the equilibrium . Which curve is going to the steeper and why?

Answer 1

There is a positive relationship between the Health (which may be represented by the life expectancy) and the income per capita. This means that as income per capita of a country improves or increases it will also increase the overall health standard of the people of that country or reversly if a country has a healthy population it will also have a higher per capita income. This is simply because healthy person is more productive than a non healthy person. This relationship can be seen graphically as-

The above curve shows the ststed relationship because we can see that the health level is increasing with increase in per capita income.

We can also see from the above graph that initially the curve is steeper but eventually it flatens out. This means that in a poor country or a country at low level of per capita income a small increase in per capita income improves the health level to a large extent. But after a certain point it starts diminishing and than to improve health level a very little there is need to increase per capita income by a large sum. So the equilibrium will be at point from where the diminishing returns starts.