Health economics question
Grossman model question – urgent help required.
an individual in the Grossman model suddenly develops hypochondriasis.
a) How would this affect her optimal level of health? Explain your answer in the light of the three roles that health plays in the model (a consumption good, an input into production and a form of stock/capital). Use appropriate diagrams to facilitate your explanation.
B)the hypochondriac suddenly wins a lottery of $1 million. How does this exogenous income shock change decisions about her health status?