Show how a consumer would choose between medical care and health(y) behavior activities using the graphical representation of the consumer choice model (assume that “amounts” of healthy behavior have “costs” or prices). How might health education affect this choice? What if medical care becomes more productive (more health benefit per “unit” of medical care consumed)? What if medical care becomes cheaper? Explain in terms of the model (i.e. what does it change in the model).

Show how a consumer would choose between medical care and health(y) behavior activities using the graphical representation of the consumer choice model (assume that “amounts” of healthy behavior have “costs” or prices). How might health education affect this choice? What if medical care becomes more productive (more health benefit per “unit” of medical care consumed)? What if medical care becomes cheaper? Explain in terms of the model (i.e. what does it change in the model).

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter18: Asymmetric Information

Section: Chapter Questions

Problem 18.9P

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The Grossman model envisions consumers deciding between investments in health H and investments in home goods Z. Figure below depicts a typical consumer’s production possibility frontier for health and home goods. a. Would any consumer with typical preferences ever pick a point on the graph between A and B? Explain succinctly (using Figure attached) why or why not. b. Succinctly describe why the graph is shaped the way it is between pointsA and B.c. Succinctly describe why the graph is shaped the way it is between points B and C.