Health Economics
14th Edition
ISBN: 9781137029966
Author: Jay Bhattacharya
Publisher: SPRINGER NATURE CUSTOMER SERVICE
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Question
Chapter 3, Problem 17EQ
To determine
The impact of health care on bones in the light of Grossman model.
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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.
The Akerlof model can be used to model the health insurance market. In this market, which party is analogous to car buyers? Which party is analogous to car sellers?What would it mean for the health insurance market to unravel?
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. Succinctly describe why the graph is shaped the way it is between points A and B.b. Succinctly describe why the graph is shaped the way it is between points B and C.c. Would any consumer with typical preferences ever pick a point on the graph between A and B? Explain succinctly why or why not.
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- [A] High-income Canadians tend to choose a higher desired health stock, even though they can afford more healthcare goods. Using the Grossman model, explain why this is the case. Use an appropriate graph to support your answer. [B] Suppose the funding agency switches both physicians' and hospitals' prospective payment to a system of retrospective payment, i.e., from salary to fee-for-service for physicians, and from global budget payment to activity-based funding for hospitals. Clearly explain each of these terms and how these changes will impact the utilization of physician and hospital services.arrow_forwardWhile the Lindahl model (equilibrium) can be analogous to the market for private goods, they have interesting differences. How do we interpret Q1 in the diagram? What about S?arrow_forwardIndicate whether the statement is true or false, and justify your answer.In the Grossman model, the marginal efficiency of investment in health care declines as health improves.arrow_forward
- 1. What was the goal of the Affordable Care Act? Briefly describe each of the three key components of the ACA with 1-2 sentences each. 2. True or False (and why): Recessions are good for your health. 3. In the framework of the Grossman model, suppose there is an increase in the return in alternate non-health market investments. Draw what happens to the MEC curve and the optimal level of health. Explain intuitively why this might be the case in reality.arrow_forwardOne major premise of the Rothschild–Stiglitz model is that there is a perfectly competitive market for health insurance. Suppose instead that the market is not perfectly competitive, and in fact competitor firms have a hard time entering the market. Could a pooling equilibrium occur in this case? What is it about competition that prevents pooling in the Rothschild–Stiglitz model? No formal proof is necessary, but do make your reasoning clear. Evaluate the following statement: competition in health insurance markets is harmful.arrow_forwardOne of the most robust, fundamental “facts” of health economics is the SES and health gradient. a) Define the SES and health gradient. b) Give three ways in which the SES and health gradient is robust. c) Provide evidence that some of the gradient is correlational (i.e., give a potential confounder) and evidence that the gradient is in fact causal. d) i. Give an interpretation of Figure 1 below in layperson terms. ii. What pattern do you see for men vs women? iii. “The education and mortality gradient does not depend on healthcare spending or whether the country has universal healthcare.” Use Figure 1 to support or refute this claim.arrow_forward
- In the framework of the Grossman model, suppose there is an increase in the return in alternate non-health market investments. Draw what happens to the MEC curve and the optimal level of health. Explain intuitively why this might be the case in reality.arrow_forwardWhat are the implications of the RAND Health Insurance Experiment results with regard to the production of health from medical care? Draw the implied PF for health outcomes given medical care, indicate (and explain) the point where the HIE suggests we are at. What does this imply with regard to health care cost containment polices like higher co-insurance rates?arrow_forwardSuppose there is a new preventative treatment for a common disease. If you take the preventative treatment, it reduces the average amount of time you spend sick by 10%. In the Grossman model, we would say that this shifts your productive time budget to the ______ and that your PPF _____. a. left; expands outward b. right; expands outward c. left; shrinks inward d. right; shrinks inwardarrow_forward
- Suppose that John Smith gets promoted to a job that causes two changes to occur simultaneously: John earns a higher wage, and a safer environment causes his health to depreciate less rapidly. How would these two changes together affect John’s desired health capital?arrow_forwardIn what sense is the individual considered a “producer” of health in the Grossman model?arrow_forwardOne aspect of the policy that is also heavily debated is the fact that not every household can afford to upgrade their car in order to avoid paying the ULEZ fees. We now want to understand how best to design the scrappage scheme, which subsidises changing cars for those who need it the most. In particular, we want to know whether the scrappage scheme can create a moral hazard problem. To guide our analysis, consider the following simple model. The government would like to introduce a subsidy to help citizens who need their car for work and cannot afford to buy a ULEZ-compliant car. It also wants to ensure that only citizens who need to drive their car regularly use the subsidy. Instead of the two groups of citizens discussed above, we focus on one particular citizen who does not drive very often, only once a year. As a result, this citizen does not emit excessive pollution even with a car that is not ULEZ-compliant. The government would therefore prefer citizens like her not to buy a…arrow_forward
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