Find the optimal level of health demanded by a person

Reference no: EM132197964

Question: (a) Find the optimal level of health demanded by a person that faces an annual interest rate of 0.05, a health depreciation rate of 0.15 per year, a health capital function equal to H= 2/(A-h), where A is the number of days in a year and h is the number of healthy days a person has in each year. The person earns $10 per hour and faces a total marginal cost of health investment of $20.

(b) How would your answer change if the person acquires a chronic disease that increases his health depreciation rate to 0.40 annually? Explain your answer.

Reference no: EM132197964

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