CHAPTER 3 DEMAND FOR HEALTH: THE GROSSMAN MODEL
CHAPTER 3 DEMAND FOR HEALTH: THE GROSSMAN MODEL
Intro Previously... Demand for health care is downward sloping People choose amount of health care they receive based on price People choose their health care,but do they choose their own health? Is health somethingthat happens to us?Or do we choose it? We use the Grossman model to explore this question Bhattacharya,Hyde and Tu-HealthEconomics
Bhattacharya, Hyde and Tu – Health Economics Intro Previously… Demand for health care is downward sloping People choose amount of health care they receive based on price People choose their health care, but do they choose their own health? Is health something that happens to us? Or do we choose it? We use the Grossman model to explore this question
The 3 Roles of Health (H) Health plays three roles in the Grossman model: 1.A consumption good 2.An input into production 3.A form of stock/capital (an investment) Bhattacharya,Hyde and Tu-HealthEconomics
Bhattacharya, Hyde and Tu – Health Economics The 3 Roles of Health (H) Health plays three roles in the Grossman model: 1. A consumption good 2. An input into production 3. A form of stock/capital (an investment)
Health as a consumption good
Health as a consumption good
Health as a direct input into utility Health as a consumption good enters directly into utility 口 Single-period Utility at time t U=U(Hy Z) H level of health ▣Zt=“home good” Everything non-health that contributes to utility E.g.video games,time with friends,movie tickets **Note:health health care Health care is not explicitly in the utility function i.e.Getting vaccines does not provide utility but staying healthy does Health as a consumption good Bhattacharya,Hyde and Tu-HealthEconomics
Bhattacharya, Hyde and Tu – Health Economics Health as a direct input into utility Health as a consumption good enters directly into utility Single-period Utility at time t Ut= U(Ht , Zt ) Ht = level of health Zt= “home good” ◼ Everything non-health that contributes to utility ◼ E.g. video games, time with friends, movie tickets **Note: health ≠ health care Health care is not explicitly in the utility function ◼ i.e. Getting vaccines does not provide utility but staying healthy does Health as a consumption good