PS1 Econ 1410 - Econ 141 Economics Health Consumers Spring...

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Econ 141: Economics Health Consumers, Spring 2011, Dr. Famulari Problem Set 1 Problem 1: Grossman model A. In the standard model of consumer choice, individuals choose among commodities that directly enter the utility function, U(X 1 , …X n ). What are three limitations of this model to describe consumer choice over medical goods i.e., where some of the X i are shots, surgeries, pap smears, proctologic exams, etc. B. Describe the aspects of health that make it an investment good. C. In Grossman’s model, what are the four ways individuals use their time? D. Describe the “Full Wealth” Constraint in the Grossman model. E. Grossman argued that we could understand the factors that influence the individual’s decisions regarding, say, the number of doctor visits per year if we realized that what consumers really want is the commodity health and they want health for two reasons: good health makes you happier and that good health gives you more time (by reducing the number of days that you are sick and increasing the days you live).
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