Relationship between income level and health


Problem: In his early work on the demand for health, Grossman (1972) found a negative relationship between income level and health. The negative effect of income on health was found only when the wage rate was held constant; thus, it was associated only with the nonwage component of income (i.e. other forms of wealth that increase total income). Provide an explanation for this phenomenon in which this is considered a negative input into the health production function. Provide specific examples of these negative inputs. What happens to the MEI curve? Provide another negative input into the health production function.

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Microeconomics: Relationship between income level and health
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