Topic

Demand for health and health capital

People want health care because they want health. These concepts follow the Grossman model, which treats health as a stock that people invest in and that wears down over time.

Concepts in this topic

• Demand for HealthDemand for health is the idea, from the Grossman model, that people value health as a capital stock, so their demand for healthcare is derived from it.
• Grossman ModelA theoretical model treating health as durable capital that individuals inherit, invest in, and that depreciates over time, produced using healthcare and other inputs.
• Health CapitalHealth capital is a conceptual stock of health that yields healthy time and changes through deterioration and health-producing investment over a person’s life.
• Health DepreciationThe rate at which an individual's stock of health capital declines over time, generally assumed to accelerate with age.
• Health InvestmentResources an individual or system devotes to maintaining or improving health capital, including healthcare use, exercise, and other health-promoting behaviour.
• Health Production FunctionA health production function shows how medical care, other market goods and own time produce health, with education raising efficiency (Grossman model).