Income, Risk, and Consumer Demand for Healthcare Essay
Why is the depreciation of capital good a cost of society? In what ways does a person’s health depreciate?
Depreciation is the way to track the wear and tear of assets over time. Now, only those assets which are defined as being capital goods can depreciate. The capital goods will provide value or generate income for the company over a period of time normally greater than one year. The depreciation of capital goods requires knowing three different variables: the original cost of the asset, the salvage value of the asset and the life expectancy of the asset. All three of these variables help the organizations or companies to determine the amount to write policies off against income on …show more content…
According to Grossman (1972), “The total cost is minimized when the increase in gross investment from spending an additional dollar on medical care equals the increase in gross investment from spending an additional dollar on time” (Pg.17). Now, health capital falls over the life cycle, however the gross investment can increase, decrease or even remain constant. This happens when a rise in the rate of depreciation (as we age our health depreciate) reduces the amount demanded of health capital and the capital supplied to consumers by a given amount of gross investment. The gross investment on health would have to increase in order to obtain a higher health stock or capital.
List at least three factors that might increase an individual’s marginal efficiency of investment in health capital.
Some factors that might increase an individual’s marginal