Jane has a budget of I dollars and is deciding how to invest over the three healthcare-related out-of- pocket spending categories: (1) preventive care, (2) dental care, and (3) chronic disease management. Denote the price of health investment in category 1, 2, and 3 as P1, P2, and P3 respectively; denote the quantity of health consumption in category 1, 2, and 3 as M1, M2, and M3, respectively. (a) Suppose the utility function of Jane is U(M1, M2, M3) = Mỹ M, Mž . sSet up the Lagrange constrained optimization problem and write down the budget constraint. (b) Solve for Jane's optimal health investment quantity in category 1 (preventative care), 2 (dental care), and 3 (chronic disease management). (c) Provide an economic intuition of parameters a, ß, and y.

Jane has a budget of I dollars and is deciding how to invest over the three healthcare-related out-of- pocket spending categories: (1) preventive care, (2) dental care, and (3) chronic disease management. Denote the price of health investment in category 1, 2, and 3 as P1, P2, and P3 respectively; denote the quantity of health consumption in category 1, 2, and 3 as M1, M2, and M3, respectively. (a) Suppose the utility function of Jane is U(M1, M2, M3) = Mỹ M, Mž . sSet up the Lagrange constrained optimization problem and write down the budget constraint. (b) Solve for Jane's optimal health investment quantity in category 1 (preventative care), 2 (dental care), and 3 (chronic disease management). (c) Provide an economic intuition of parameters a, ß, and y.

EBK HEALTH ECONOMICS AND POLICY

7th Edition

ISBN:9781337668279

Author:Henderson

Publisher:Henderson

Chapter4: Economic Evaluation In Health Care

Section: Chapter Questions

Problem 1QAP

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