Show how a consumer would choose between medical care and health(y) behavior activities using the graphical representation of the consumer choice model (assume that “amounts” of healthy behavior have “costs” or prices).
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Show how a consumer would choose between medical care and health(y) behavior activities using the graphical representation of the consumer choice model (assume that “amounts” of healthy behavior have “costs” or prices).
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- Martha spends 5 hours of free time exercising and playing music per day. The table below represents the level of utility she receives from the various combinations of exercise and music activities. For instance, if she only plays music, her total utility from exercise will be 0, and the utility from music will be 50. If she exercises for 1 hour, she will receive a level of utility of 25. Utility is measured in ‘utils’; those numbers are arbitrary and designed to quantify the benefits received from various actions. Utility for Exercise Utility from Music 0 utils from 0 hours of exercise 50 utils from 5 hours of music 25 utils for 1 hours of exercise 45 utils from 4 hours of music 40 35 45 20 50 0 Marginal analysis will help Martha in her decision making regarding how to spend her free time because ... All answers are correct. She will realize which activity is more important to her. She will be able to find the combination of music and exercise which gives…An individual has the following utility function: U = Z!/2 H/2, where Z is a composite good and H is the level of health. The individual has income, m = $100. The price of the composite good, Z, is Pz = 1. The price of health, H, is PH = 4. What is the optimal consumption bundle of H and Z that maximizes utility? Show your steps and show the decision graphically (which includes finding the endpoints of the budget constraint).How do we measure utility? Are interpersonal (i.e. between people) comparisons valid? Why or why not?
- Suppose that consumers spend their income on either health insurance or on a“composite good”. Find the optimal bundle of health insurance (HI) and other goods (G) given the following budget constraint and utility function. How much utility does this bundle give the individual? Put HI on the x axis of any graphs. Budget constraint: 1600 = 160*HI + 20*GUtility function: U=HI*G where MRS = -G/HISuppose that income causes health in the following specific manner: h = 2.25y and that health aids income as follows: y = 6 + 3h Based on this information, answer the following: a. Graph the two functions on the (y, h) graph and show the equilibrium (y on the x axis and h on the y axis). b. Derive the equilibrium pair (y*, h*) and show on the graph above. 7 c Now suppose that access to health is segmented by income in this country so that: h= 2 + .25y for all y 50 Derive the new equilibrium and redraw the graphs again in the (y, h) space and depict the old and new equilibria.No hand written solution Please draw both graphs Consider a consumer spending their available income on two goods: medicines and food. Draw a graph showing the consumer maximizing utility given their income. Clearly label the graph. Show what happens to the utility maximizing solution if the price of medicine increases. Draw another graph showing what happens if income increases.
- Suppose 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%. The optimal combination of Z (home goods) and H (health goods) _____. Suppose 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%. The optimal combination of Z (home goods) and H (health goods) _____. a. both may decrease b. H may increase; Z may not change c. both may increase or one may stay the same while the other increases. d. Z may increase; H may decrease e. both may increaseSuppose an individual in the Grossman model is trying to decide what to have for dinner. His options are as below. Each dish has an effect on the level of home good Z and health H. Мeal Home good Z Health H Steak and eggs +7 -2 Kale salad with broccoli -2 +5 Entire box of cookies +10 -20 Suppose the dinner's single-period utility function is U=3Z+H 1. If the individual is trying to maximize his single-period utility, and he can only select one item from the table (assuming he can afford any item in the table). Which meal would he choose? Explain your answer. 2. A miracle pill is discovered that halves the negative health impact of cookies. How does this impact the individual's choice? Explain your answer. 3. If the individual lives in multi-period rather than single-period, would he value Z or H more in multi-period? Explain your answer. Paragraph I U v A •.. > lili BSuppose an individual in the Grossman model is trying to decide what to have for dinner. His options are as below. Each dish has an effect on the level of home good Z and health H. Мeal Home good Z Нeath H Steak and eggs (A) Kale salad with broccoli (B) Entire box of cookies (C) +7 -2 -2 +5 +10 -20 Suppose the dinner's single-period utility function is U=3Z+H • If the individual is trying to maximize his single-period utility, and he can only select one item from the table (assuming he can afford any item in the table). Which meal would he choose? Please type in A, B, or C (do not enter space, punctuation, or any other symbols or words) • A miracle pill is discovered that halves the negative health impact of cookies. How does this impact the individual's choice? What meal would be chosen now? Please type in A, B, or C (do not enter space, punctuation, or any other symbols or words) • If the individual lives in multi-period rather than single-period, would he value Z or H more in…
- John currently lives in Sydney where he earns $2700 a week as a high school principal. If he moves to Batemans Bay, he has to accept a position as a classroom teacher where he will earn $2100 a week. John only considers two goods, cost of living (c) and health (h). In Sydney, pe = 54 and ph = 90. In Batemans 1 1 Bay, Ph = 36. John's utility function is u(c, h) = h + cihi. a) What is John's optimal consumption of h in Sydney? b) What would be John's optimal consumption of c in Batemans Bay? c) What is the maximum cost of living ph such that John will accept to move to Batemans Bay?Problem 5. Consider the utility function U = In(M) + In(S) where M is the level of medical care, and S is spending on all other goods. This implies MgUM = M1 and MgUS = S1. Suppose medical care is priced at $120 per unit of medical care, income is $30,000, and let Ps = 1.1. Write the budget constraint. [5]2. Sketch the budget constraint where the quantity of M is on the horizontal axis. [5]3. Sketch the optimality condition. How is this optimal computed? [5]4. Suppose price of medical care decreases by $20 per unit of medical care, sketch the new budget constraint on the same graph as Problem 5.2. [5]Suppose an individual has a single period utility function represented by: U = Z²H² Suppose further that the individual is deciding how to spend an hour of their time. Below, you are given information about the meal options and how each meal contributes to the "Home" ("Z") portion of utility and the "Health" ("H") portion. Meal Health (H) contribution to Utility Puzzle Jogging Watching netflix +10 Home Good (Z) contribution to Utility Jogging Watching netflix Doing a puzzle If the individual is in a one-period model, meaning they only care about maximizing utility today, what will they choose? +1 +3 +3 +5 +3
