F Z K Z \u03b2 K1 \u03b2 where \u03b2 0 1As usual scarcity prevents the consumer from enjoying

F z k z β k1 β where β 0 1as usual scarcity

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F(Z, K) =ZβK(1-β), whereβ(0,1).As usual, scarcity prevents the consumer from enjoying unlimited amountsof consumption and health services. This scarcity takes the form of a budgetconstraint. If the price of consumption isp, the price of health care isw, theimplicit price of health capital stock isrand the consumer’s money incomeisY, then the consumer’s budget constraint takes the formpC+wZ+rKY.Thus the consumer’s long-run utility maximisation problem is to chooseC,ZandKtoMaxCαH(1-α):H6ZβK(1-β), pC+wZ+rK6M,C>0, Z>0, K>0}. 17
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