Suppose that income causes health in the following specific manner: h = 2 + .25y and that health aids income as follows: y = 6 + 3h Based on this information, answer the following: a. Graph the two functions on the (y, h) graph and show the equilibrium (y on the x axis and h on they axis). b. Derive the equilibrium pair (y*, h*) and show on the graph above. 7 c . Now suppose that access to health is segmented by income in this country so that: h= 2 + .25y for all y < = 50 and h = 4 + .25y for all y > 50 Derive the new equilibrium and redraw the graphs again in the (y, h) space and depict the old and new equilibria.

Suppose that income causes health in the following specific manner: h = 2 + .25y and that health aids income as follows: y = 6 + 3h Based on this information, answer the following: a. Graph the two functions on the (y, h) graph and show the equilibrium (y on the x axis and h on they axis). b. Derive the equilibrium pair (y, h) and show on the graph above. 7 c . Now suppose that access to health is segmented by income in this country so that: h= 2 + .25y for all y < = 50 and h = 4 + .25y for all y > 50 Derive the new equilibrium and redraw the graphs again in the (y, h) space and depict the old and new equilibria.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter4: Utility Maximization And Choice

Section: Chapter Questions

Problem 4.2P

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