Recall Application 3, "Increasing Health-Care Expenditures and Crowding Out," to answer the following questions:
-According to the application, as individuals become richer, sooner or later they will substitute spending away from _______ and into _______ .
A) nursing homes; retirement communities
B) less expensive health care; more expensive health care
C) consumer durables; increasing their lifespan
D) consumer durables; stocks of HMO's

Question

Quizplus · Accepted Answer

As individuals become richer, they tend to substitute spending away from consumer durables (such as cars, electronics, etc.) and into increasing their lifespan through healthcare expenditures. This is consistent with the income elasticity of demand for healthcare being greater than one.

Recall Application 3, "Increasing Health-Care Expenditures and Crowding Out," to Answer