1. Depreciation of capital goods is borne by the society indirectly since the company or organization factors in the cost of depreciation in setting the price for its products. Person’s health, just like capital good, ‘depreciate’ i.e. deteriorate with time. It does this through ageing, diseases, accidents and even the lifestyle. The rate of depreciation increase with age. 2 According to Grossman’s model, optimal level of investment in health occurs where marginal cost of health capital equals to marginal benefits. In addition, optimal health stock is affected by age, wage and education. Health depreciation increase with age, it therefore it becomes more costly for old people to attain same level of health capital stock consequently, the optimal health stock and marginal benefits of health decreases. Consequently, the amount of the treatment demanded is effectively lowered. 3. Education Preventive care Exercise Dieting 4.
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- Winter '17