ECO327 - HW1 Deadline: XXXX Name: Homework 1 covers chapters 2, 3 and 4. Please answer each question to the best of your ability and remember to show all work! 1. How does the RAND Health Insurance Experiment show that patients are price sensitive with respect to consuming healthcare? 2. In the Grossman model, what do consumers care about? (In other words, what enters into the consumer's utility function?) 3. What are the four ways a consumer in the Grossman model can split their time? 4. What are the inputs needed to produce health goods and home goods? Name an example of each that are different from the lecture notes 5. Explain the trade-off in the Grossman model between time working and time on producing home goods (HINT: If a consumer substitutes one hour working with one hour of time spent on producing home goods, what are the costs and benefits of this?) 6. Explain why it is not optimal for a consumer to choose Point B in the following graph of a possibility production frontier in the Grossman model 7. Explain what happens to productive time when an individual's health improves? 8. Suppose a consumer's wage increases. What happens