Question

15 How does aging change the shape or size of the PPF in the Grossman model from period to period? Draw a graph to demonstrate the effect of aging, and include a short paragraph of text justifying the changing shape or size of the PPF.

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Answer 1

According to Grossman model ,the health condition optimally decreases with age and as you age the expenditure on health increases.

According to Grossman model, the health condition optimally decreases with age and as you age the expenditure on health increases changes in the shape or size of PPF due to Age As individual age the rate of health stock is likely to increase (50 in the fig it changes from a_0 to a_1 and finally to a_d) the health of order individuals is likely to determine faster than the health of younger individuals this means the age factor changes the shape of PPF Optimal health stock reduces with age (i.e A_0 > A_1) As the person ages the optimal health stock will decrease if the rate of depreciation of health increases as person ages The optimal health at the younger age, A_0 is greater than A_1 the optimal stock at the older age Thus it is clear that as man ages the health decreases and PPF shifts left The shape of PPF moves left indicating reduced health condition