This is a health economics question about Grossman model Tru

This is a health economics question about Grossman model.

True or false(and why):

In the grossman model,optimal health status declines with age.

Solution

True.

Optimal health status is attained when marginal cost of health capital (MC) equals marginal benefit (MB):

MC = MB.

MC is the sum of depreciation rate of health (d) and interest rate that consumer is charged (r):

MC = d + r

With increasing age, \"d\" increases because health depreciates faster. As d decreases, MC decreases and MB also declines.